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Chennai Real Estate : Ready For The Quantum

Leap

By DHRUVA JYOTI CHOWDHURY, KOLKATA, INDIA

Chennai has several inherent advantages for real estate development and the
city is poised for a quantum leap. There has been an unprecedented growth in
demand for real estate across all markets making the exercise dearer. This is
attributed in no small measure to the vibrant economy, robust growth and the
resultant housing demand-exceeding supply.

As the Detroit of India, Chennai has been


luring several industries to its fold due to its
strategic location, availability of skilled
manpower, better infrastructure and
cosmopolitan outlook. The IT sector's prolific
growth has triggered real estate demand to a
new high now. And the declaration of old
Mahabalipuram road by the State Government
as IT corridor and laying of world-class
infrastructure facility under way has seen a
virtual exodus of property developers to
garner land for development.

The all-round development has enthused even


property developers from other cities like
Bangalore, Hyderabad, Mumbai, Pune and
New Delhi to enter Chennai and test the
waters. Mumbai developer Hiranandani
Constructions has already acquired nearly 100
acres on IT corridor opposite Siruseri Park.
While some builders have finalised a few
deals, others are in the process of clinching deals. It has been a Herculean task for a
majority of the builders to get hassle free title to the property. The 100 per cent foreign
direct investment (FDI) under automatic route in real estate development is a virtual boon
for major global players to enter Indian cities. A number of trade delegations have visited
the city for preliminary survey to consider investment in large-scale projects. Not a day
passes without an investor group surveying the IT corridor for suitable areas for
development. While Singapore Realty is yet to officially launch their maiden township
project in Siruseri Park, a number of township projects are under active consideration in
select areas.

With the thrust given to infrastructural development, there has been a perceptible in the
mindset of people about commuting to city areas. People are nowadays prepared to shift
to suburbs if integrated township project is available with built-in facilities. A section of
people in the budget range of Rs. 25 - Rs. 30 lakh are keen to own independent homes
even if it involves travelling 20 km outside the city. But it should be equipped with a
complete range of facilities, he added.

The residential property market has been witnessing an unprecedented growth across all
markets. There are homebuyers who are location-specific and prepared to wait as and
when a suitable project is undertaken for development in the locality. "We have a waiting
list of over 100 buyers for specific locations and what is more clients are keen to commit
whenever a project is launched in that particular location", says T Chitty Babu, managing
director of Akshaya Homes.
A significant development is that land values zoomed across the city. Realtors say that
this trend can be attributed to upsurge in demand for city properties. The spillover effect
is felt in suburbs as well with property developers garnering more areas for residential
property development. Yet another trend is that developers are shying away from city
areas due to steep increase in land values and unviable operation to develop real estate. It
is this sudden development that triggered apartment price increase in posh areas across
the city (see table 2 below). "It is becoming virtually unviable to acquire land at the
exorbitant rate and develop large areas of residential property in the city", feels V Suresh,
managing director ,Real value promoters limited. Obviously, with a number of people
chasing too few a stock in prime areas, apartment prices zoomed at select areas across the
city, he added.

While apartment prices are up by 25-30 per cent in the last six months alone, it was
mainly due to sudden spurt in land prices in specific locations, feels P V Sanmugam,
managing director, KGEYES Residency Private Limited, which has recently built a high
end apartment project on Greenways road, and a new project is under way in Boat club
area.

Surge in Land prices -Table 1 Apartment prices - Table 2


Location Price during Price during Location Year 2004 Year 2005
January (Rs October (Rs (Rs) (Rs)
lakhs) lakhs)
Abhiramapuram 2600 - 3000 4500
Alwarpet 65 - 80 100 - 150
Adyar 2400 - 2600 2800 - 3200
Adyar 65 - 70 80 - 100
Boat Club Road 3500 8250
Besant Nagar 60 - 65 70
Chamiers Road 3000 4000
Boat Club Road 85 - 100 185 - 200
Kalakshetra colony 3000 3200
Chamiers road 75 - 80 75 - 100
K K Nagar 1600 - 1700 2300 - 2450
Koyambedu 40 55
MRC Nagar 2625 - 3200 3000 - 4750
Mylapore 60 70 - 130
Nungambakkam 2100 - 3325 2900 - 4800
Poes gardens 100 150
T. Nagar 2750 - 3000 3000 - 4250
Saidapet 30 - 35 40 - 55
Valmiki Nagar 2000 - 2350 2600 - 2700
Sri Nagar 40 50
colony
T Nagar 70 - 100 80 - 125
Villivakkam 12 - 15 25

Property developers complain that development control rules are to be partly blamed for
the steep increase in property prices. With acute land shortage, a city like Chennai has to
grow only vertically and to that extent, the government should have liberalised the floor
space index (FSI). It is futile to extend such incentives only to IT buildings when there is
no proportionate supply to match housing demand due to entry of migrants from other
cities. Moreover, the government should consider granting multistoried apartments
outside corporation limit, realtors say.
This is important especially in view of the fact that 50 out of the 80 IT parks coming all
over the city are under various stages of implementation on the IT corridor alone. Second,
inordinate delay in granting building permission leads to cost overrun of projects, which
is ultimately passed on to the buyer. Approvals invariably take more than six months
especially at a time when other cities are introducing single window clearance and fast
track clearance schemes. Today home buyers are in a precarious situation though several
housing finance companies and banks provide flexible lending norms and all time low
lending rates to invest in housing.
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