Chennai’s realty market remained subdued in Oct-Dec 2019. New launches dipped by 30 percent, QoQ, due to the ongoing liquidity crunch, sand shortage and inventory overhang. The city saw the addition of around 35 new projects this quarter with majority of them being re-launches. The elimination of the ‘mixed residential’ projects category from the new building rules in the State left the fate of around 30 such projects hanging in the balance, marring realty sentiment significantly.
Unsold inventory stood at 13,500 units in Oct-Dec 2019, slightly lower than Jul-Sep 2019. Property rates were stable, QoQ, while rentals spiked by three percent, YoY. Chennai witnessed the sale of around 5.2 million sq ft of office space in 2019.
The supply of offices jumped by over 30 percent and stood at 1.7 million sq ft. Old Mahabalipuram Road (OMR) and Pallavaram-Link Road reported maximum transactions.
Residential sales spiked by six percent in 2019 and stood at around 17,000 units. This growth, however, is because of the virtue of low base effect. Localities such as Kolathur, Korattur, and Madhavaram in North Chennai remained most popular, especially for compact homes.
The city is unlikely to witness any increase in property prices in near future. Factors such as limited buyer base and a 14 percent gap in the demand and supply of properties priced within Rs 40 lakh, with former overweighing the latter are at play here.
In the last quarter of 2019, property prices remained unchanged in Chennai’s housing market. The city, however, narrated a better rental story, with average rent increasing by three percent in Oct-Dec 2019 versus Oct-Dec 2018. South Chennai accounted for over half of the total new launches in the studied quarter. Being an IT/ITeS hub, the region remained a favourite amongst investors and the tenant community. This quarter, Sholinganallur, Velachery, Chromepet, Kodambakkam, and Medavakkam housed the maximum number of newly launched and re-launched housing projects. The region also continued as a rental hub with as many as 20 localities seeing rental rates going up by 2-9 percent, YoY. Some of the top performers include the popular hubs of Oragadam, Padur and Perumbakkam.
Affordable homes priced within Rs 40 lakh captured over half of the housing demand in the city. On the contrary, the highest demand-supply gap was registered in the price category of Rs 60 lakh-Rs 1 crore, with supply outnumbering demand by 13 percent. Not surprisingly, areas close to the IT hubs and commercial spaces remained popular. Located along the Chennai-Trichy Highway, Tambaram posted a hike of two percent, QoQ, on the back of ample residential inventory along with easy accessibility via the Mass Rapid Transit System (MRTS).
The proposed Porur-Vadapalani metro corridor helped Porur gain traction amongst buyers and tenants. The locale scored a nine percent hike in average rentals, YoY. With residential units priced around Rs 5,800 per sq ft, property ‘asks’ also went up, albeit by a modest one percent, QoQ.
Chennai’s real estate market, which has been under pressure for some years now, witnessed a few green shoots of recovery in the last quarter of the year 2019. The new metro line and increasing office space absorption are two factors pushing growth. The city, however, needs more supply in the affordable category to revive end-user interest and sales volume. Additionally, pro-buyer announcements such as tax benefits and more subsidies for first-time home buyers might incentivise fence-sitters to enter the market in the coming quarters. The Union Budget 2020-21, hence, will have a major role to play in deciding the realty future of the city.