Residential space: Chennai poised for take off

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There is demand seen for a greater number in in Chennai but this demand is mostly felt in the price bracket of Rs 25-40 lakh. There is demand seen for a greater number in in Chennai but this demand is mostly felt in the price bracket of Rs 25-40 lakh.
SummaryChennai will play a significant role in Indian residential demand at 30,000 units per annum for the next four years.

Velachery, Porur, Anna Nagar and few other northern pockets.

It would be good to see places deriving their appreciation not just by demand but also by development of infrastructure as that would make a difference between the better and the best locations.

A new trend which Chennai has been witnessing over the past 7-8 months is the amount of ultra luxury stock which is coming in CBD locations. There are at least about 10 projects or more leading to supplies of more than 1,000 units in this space over the three years to follow.

This year has also set the trend for more number of villas and row houses being developed in the peripheral areas and that has been a proving success for a few developers who have got in good sales. We have seen villas come up in all corridors including OMR, NH-4 and the Grand Southern Trunk Road. The strength of developers would be seen in how they are able to differentiate the product than being more innovative.

Innovation would add to cost increase at the developer’s end unless it is spent through technology that will help reduce construction time frames or bring in efficiencies of scale across projects for the developers. However in the immediate term, we would be witnessing more of products being redefined than being innovative and innovation will hold the key once the cycle changes to a bullish nature.

It is also worth mentioning that private equity and NBFC activity has been on the rise and they have been the quick and alternate sources of funds in the absence of flexible funding from banks in the interim. What will help developers increase sales and drop prices would be for the NBFCs’ to possibly soften the rates by 2-3 per cent depending on projects and quantum being lent.

Over the next six months we will see the mixed bag of market conditions with respect to sales and developers who hold the key will be the ones who have been able to gauge the customer instincts on size and price.

The author is Associate Director, Investments, DTZ India

Satish Narayanan

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