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South chennai among country’s realty hot-spots

The Hindu Business Line, Chennai

November 17, 2012

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Two reports by different international property consultants point to the continued dominance of South Chennai as a hub for residential development. A report by Knight Frank India identifies two localities in the southern part of the city as ideal residential investment option with high appreciation likely in the coming years.

Another report, a DTZ Insight says the South and West suburbs of Chennai will see the maximum additions of residential space with more than 60 per cent coming in the South and nearly 30 per cent to the West of the city.

According to Knight Frank India, Pallikaranai and Medavakkam to the south of Chennai are among the top destinations for residential investments.

It says in a newly launched Investment Advisory Report, the start of a series on real estate investment advisory, these two areas are among the top investment options in residential destinations in the country over the next five years (2013- 2017).

The research has identified these destinations from over 100 urban centres in the country based on assessment of real estate drivers such as employment, physical infrastructure, connectivity to important locations, access to social infrastructure, planned development, proximity to premium office spaces and land availability.

A total of 13 destinations have been identified, which are spread across Mumbai, Delhi-NCR, Bangalore, Chennai and Pune.

It also identifies select under-construction projects in each of these destinations where an investor can buy property.

With the IT/ITeS sector constituting 71 per cent of the total office space in Chennai, it has emerged as a favourite destination for this segment.

The IT/ITeS and automobile sectors are going to be the driving factors for Chennai’s growth. Over the next five years, the report forecasts more than 21 million sq.ft of additional office space will be absorbed in Chennai with the southern parts accounting for more than 18 million sq.ft.

This will benefit the residential market.

Also, infrastructure projects such as the Metro Rail, the monorail corridor and the Outer Ring Road will enhance the connectivity of various locations within the city. According to the report, since 2007, over 68,914 residential units have been launched in South Chennai. Of these, 50,666 units have been absorbed as of the third quarter of 2012.

Sought-after

Residential prices in Pallikarnai is estimated to appreciate by 93 per cent between 2012 and 2017.

Since 2007, over 1,684 houses have been launched in residential projects and 1,382 units have been absorbed till the third quarter of 2012

Pallikarnai is located not only closer to the city centre but also has easy access to all the employment hubs on OMR and GST Road

Residential property prices in Medavakkam are like to more-than double over the next 5 years, according to the report.

Over 5,707 units have been developed 2007, of which 4,147 units have been sold as of the third quarter of 2012. The minimum price is around Rs 21 lakh and Rs 34 lakh for investment in Medavakkam for a 1 BHK and 2 BHK respectively

The upcoming monorail corridor will improve connectivity of both localities.

Gulam Zia, Executive Director- Retail, Advisory & Hospitality says, “With property options ranging from 3,200 sq.ft to 15,000 sq.ft and investor returns in the range of 18-29 per cent a year, residential real estate will emerge as a promising asset class for the next five years.”

According to DTZ Insight, the apartment stock in Chennai was about 62,000 units as of third quarter of 2012 and this is set to double by 2015.

Growth in the residential market is primarily concentrated in the southern and western suburbs of Chennai. These two areas will contribute close to 63 per cent and 28 per cent of the new supply respectively in the next three years.

Over 51 per cent of the residential stock are three-bedroom-hall- kitchen units while two-bedroom units accounted for 42 per cent. However, in the pipeline supply both unit types account for around 42 per cent each, though the average area per unit has increased.

Prices of residential properties in Chennai, unlike other major metros, have moderated only marginally during the economic crisis of 2008-09, and the price appreciation during the recovery thereafter has also been gradual. However, significant price appreciation was seen in the historically central areas of the city.

During the first three quarters of 2012, apartment sales have come down compared to the same period one year ago, due to cautious sentiment from the grim global as well as local economic conditions.

Policy support

However, in recent weeks due to the number of measures taken by the Central Government to put the economy back on a higher growth trajectory, there is a marked change in investor sentiment, which is expected to spill over to the city’s residential real estate sector.

During the next few years the residential real estate market is expected to grow primarily in the southern and western peripheries of the city, driven by the balanced growth of the local economy.

It will also be aided by further strengthening of the services sector, particularly the Information Technology/Information Technology Enabled Services (IT/ITES) and Banking Financial Services and Insurance (BFSI) industries, and the manufacturing sector particularly from automotive and electronics, according to the report.

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