Chennai’s economy is currently the 4th largest in India and the city features amongst the top 10 fastest-growing cities in the world.
Known as the Detroit of India for contributing around 60% of the country’s automobile exports, Chennai – the capital of Tamil Nadu – is also well-known for its port-centric businesses, engineering, manufacturing establishments and IT-ITeS companies. Chennai also has a presence of numerous Fortune 500 companies which leads to a massive employment generation.
New unit launches in Chennai stood at 4,418 in 2017, with around 45,000 under-construction units. Old Mahabalipuram Road, Perumbakkam, Porur, East Coast Road (ECR) and Pallikaranai are among the most preferred micro markets, with residential property prices hovering in the range of INR 3,500 to INR 8,300/sf. Between 2013-2017, around 1.2 lakh units have been added to Chennai’s residential market in Chennai.
Of the four zones (Central, West, North and South), South Chennai surpassed the others to emerge as the most rapidly-growing market, accounting for 65% of the city’s total housing supply since 2013. On this front, South Chennai is followed by West Chennai with a contribution of 27%.
The presence of IT-ITeS establishments, SEZs and manufacturing units have been the primary growth stimulators for the southern region. In addition, rapidly developing infrastructure is boosting the residential real estate market along the Old Mahabalipuram Road (OMR), Thoraipakkam – Pallavaram Road (TPR) and Grand Southern Trunk (GST) Road.
Lowest unsold inventory among top 7 cities
Chennai has the lowest unsold inventory among top 7 cities in India, with its unsold stock of 27,000 units (as of Q4 2017) worth INR 17,500 crore. The estimated period for the unsold inventory in primary sales to get fully absorbed is approximately 32 months, compared to top metros of NCR and MMR which are likely to take 75 months and 61 months, respectively. South Chennai tops the unsold inventory chart, accounting for 69% of total unsold units in the city. However, this supply was unleashed to cater to the massive existing demand in this region, and absorption will be rapid.
The mid-income housing segment, consisting of units priced at between INR 40 – 80 lakh, accounts for 44% of the overall available inventory. This segment currently dominates the primary sales residential market in Chennai, followed by the affordable housing segment (units priced below INR 40 lakh) which accounts for 29% of the existing primary market supply. The considerable traction being seen in the affordable and mid-range housing segment is primarily due to the various schemes and incentives offered by the Government to promote its Housing for All mission.
Reduced launches – cause & effect
Chennai’s residential real estate market took a major body-blow from the floods in 2015 and the political instability in the consecutive years. As a result, it witnessed reduced new launches in 2017. With restricted supply and stable demand, absorption improved in 2017, and unsold inventory consequently decreased by 24% in Q4-2017 vis-à-vis Q4-2016.
Despite the current sluggishness of the Indian residential property market, Chennai’s housing sector market is gradually gaining new momentum on the back of continuous infrastructure upgrades and inward migration of working population responding to the increasing employment opportunities.
[Santhosh Kumar is Vice Chairman at ANAROCK Property Consultants]