Chennai metropolitan area expanded
The inclusion of Tiruvallur and Kanchipuram districts under Chennai Metropolitan Area (CMA) has led to a seven-fold expansion of the city limits. This will help open prospects of real estate development in suburban areas and bring uniformity in infrastructure across the city.
Government proposes new housing policy and rent authority
The State government has proposed a holistic housing policy, aimed at urban infrastructure development, promoting low cost housing, and easing approval processes. The State also plans to set up a rent regulatory authority to tackle rental property disputes.
Smart city projects to commence soon
The upgradation process of Thyagaraya Road in T Nagar has gained pace under the Chennai Smart City project. Prior to its development as a pedestrian plaza, the area is planned to see an overhaul of footpaths and storm water drains. New water and sewerage pipelines will also be installed.
Shelter fund cess to propel home prices
The proposed levy of the shelter fee at the rate of 75 percent of the infrastructure and amenities charges on developers is expected to propel home prices in Chennai by Rs 25 per sq ft.
Height restrictions ease for low-rise buildings
Low-rise buildings in Chennai consisting of stilt and four floors can now have higher ceilings. The lifting of height restrictions would mean better aesthetics and enhanced use of technology. This will also give owners the freedom to install centralised air conditioning systems and false ceilings.
Chennai at a Glance
The persisting confusion surrounding RERA and Goods and Services Tax (GST) kept the growth of Chennai’s realty market under pressure even in the third quarter of 2017. The city, correspondingly, did not report any significant improvement in sales volume and new launches across budget segments. However, multiple positive announcements helped the market dodge a steep downtrend, paramount among which was the launch of the State’s RERA portal. The portal fast-tracked the project registration process and enabled buyers to submit their grievances, uplifting buyer confidence. While this had little impact on sales, it led to robust enquiries and helped average capital values maintain status-quo.
Infrastructure projects, such as smart city initiatives and Chennai Metro phase II, along with the proposed rationalisation of property tax also played a significant role in boosting the market sentiment. Together, these are anticipated to translate into healthier sales and price rise in the forthcoming quarters.
Meanwhile, Chennai’s rental landscape is set for a major overhaul as the State prepares to establish a rent regulatory authority. Supported by the National Urban Rental Housing Policy proposed by the Centre, this would facilitate seamless transactions amidst a self-reliant rental residential segment in the city.
Still floundering under the impact of the several upheavals that shook the city over the last few quarters, Chennai reported no change in the overall property prices this quarter. Average ‘asks’ across various budget segments in both primary and resale markets, largely plateaued, as buyers continued to defer purchase decisions. This, however, worked in the favour of the rental housing segment, which received greater interest from home seekers, a trend that echoed across the country.
- Posting a four percent hike each in property values, Poonamallee and Guindy ruled the capital charts in Chennai in Jul-Sep 2017. The focus on Chennai Metro Phase II and the revival of monorail project brought these micro-markets in limelight, pushing housing prices up in the current quarter.
- Buyer interest appeared to nudge towards suburban localities in the third quarter of 2017, which led to a slight dip in ‘ask’ rates in popular micro-markets such as Ambattur and Arcot Road. Both the localities saw capital rates slipping, albeit minimal.
- Chitlapakkam was the dark horse in the list of top performers this quarter, managing a four percent growth in average home prices and a whopping 10 percent, YoY, surge in rental ‘asks’. Its proximity to popular localities such as Chromepet, Tambaram, and Pallavaram, along with the easy access to Old Mahabalipuram Road (OMR) and Grand Southern Trunk (GST) Road, helped Chitlapakkam take centre stage.
- Infrastructure projects, including the upcoming metro corridors, smart city, and revival of Port- Maduravoyal road projects, turned the tide towards Virugambakkam, Maduravoyal, Perumbakkam, T Nagar, Perambur, and Medavakkam, pushing their capital values up by one to three percent, each, QoQ.
- The city reported a two percent average growth in rental values over the last one year. As prospective buyers shelved their purchase decisions, rental segment continued to grow.
- Mugalivakkam and Pallikaranai topped the rental charts with 13 percent growth each, YoY. Meanwhile, Ambattur and Avadi maintained their spots among the popular rental markets with a surge of nine and 11 percent, YoY, in monthly ‘asks’, respectively.
With developers struggling to conform to RERA and GST norms, Chennai’s housing sector remained devoid of new launches this quarter. The lull in sales continued unabated as buyers avoided rushing into home purchases. Investors displayed a strong affinity towards commercial assets, forsaking the residential market until the segment regains stability post multiple policy changes.
- Ready properties continued to reign supreme on buyers’ preference list, spurred by the shortage of RERA approved under-construction projects in Chennai. Thus, completed projects captured close to 90 percent of the overall demand for residential apartments in the city.
- Despite afflicting new launches, the share of apartments among all property types available in the market surged by a massive 21 percent, QoQ. This was caused by the addition of resale units in the supply stream, as investors and second home owners sought to dissolve their investments.
- Majority of the resale units added to the market were high-end properties, which skewed the supply ratio among different price categories. As a result, the high-income segment (Rs 40-60 lakh) witnessed supply growing to 26 percent, while the share of luxury homes (Rs 60 lakh-Rs 1 crore) in the market reached 22 percent.
- Since developers are yet to come to terms with RERA, the additional Floor Space Index (FSI) announced for affordable housing could not translate into new launches in the segment. Combined with the effect of fuelled high-end resale supply, this contributed to the share of budget units plummeting from 18 percent last quarter to nine percent in Jul-Sep 2017.