Econintersect: When it comes to the annual growth of residential real estate within the Chennai (formerly Madras) sector, numerous reports have confirmed a total increase of 13,000 units launched throughout 2013. Even though this figure seems impressive, further studies estimate that more than 16,000 residential units will be launched across the board throughout 2014 alone.
A Potential Recovery from Major Decline
Although 13,000 units is a high number of residential units to launch within a single year, it is nowhere near the peak record within the Chennai area. That figure actually reflected a major decline of close to 40 percent for this region from the 2012 results.
The low availability of ready-to-occupy residential products in quite a few micro-markets throughout this area played a significant role in this decline overall, according to a study conducted by Cushman and Wakefield. However, experts now have projected that the market for luxury residential properties in Chennai will experience a total revival in demand since the average customer now prefers to have customized housing with first-class amenities, according to Business Standard.
There are several key factors that will play a significant role in why these changes will lead to a phenomenal year of growth throughout the area.
The Key Factor That Will Influence Growth
One key factor is directly connected to the increase of IT Enabled Services (ITES) and IT companies within Chennai in recent years. There have been quite a few ITES and IT companies established within this area that have already generated a substantial increase in this emerging market.
One report states that well over 4 million square feet of commercial office space was absorbed mostly by these types of companies in 2013 alone. Keep in mind that the IT population within the city has already reached 4.5 lakh, so chances are that the need for real estate developments to increase in the near future will also spread outside of the city as well, according to Money Control.
Customer Confidence Has Increased Substantially
As mentioned earlier, the first quarter of 2014 has been able to start off strong with an optimistic outlook for real estate developments in Chennai due to the drastic changes in preference and overall needs of the average customer. It seems as if the confidence levels and overall sentiments of most homebuyers have turned from negative to positive.
The average homebuyer is no longer reluctant to invest in the real estate market, which is a vast improvement over conditions from previous years. The buying trend declined severely in 2013 due to substantially higher property prices and interest rates, along with major defaults and delays in delivery. Since the sales were low while the inventory was high, investors and end-users alike seemed to stay away from finalizing new investment deals. However, one study confirmed that 75 percent of potential homebuyers have displayed a definite intent to buy a new home within the year, with 46 percent displaying a reasonable level of confidence and the rest being overconfident and “bullish,” according to Siasat.
Luxury Launches Have Already Increased
Even though there was a 60 percent drop in the number of year-to-year luxury launches, the number of luxury launches for 2014 has already increased and has shown potential for further growth in the near future. Close to 300 high-end units throughout such areas as RA Puram, Mylapore and Poes Garden are already in their soft launch stages. There are almost 900 mid-end units in such areas as Sriperumbudur and Rajiv Gandhi that have already transitioned into pre-launch stages, according to Business Standard. Quite a few Unitech flats in Chennai are in various stages of development as well. It is evidently clear, therefore, that investors and developers have no need to worry about experiencing any type of decline in the year to come.
The Market is Controlled by the End-User
Even though it is not necessarily true within other metropolitan cities throughout India, it is apparently clear that the Chennai market is primarily driven and controlled by its end-users. Nearly 90 percent of the people investing in real estate developments within this area are from this particular group, according to Money Control, providing a stable foundation for long-term investments as the residential market continues to progressively reduce the volatility of the market overall.
As mentioned earlier, better employment opportunities and commercial expansion will draw a massive amount of attention to Chennai in the years to come, which will increase the need for more real estate developments and an exponential growth in the social infrastructure of this area. When it comes to capital appreciation and residential investments, Chennai remains the preferred choice for the average homeowner. Therefore, even though the residential estate market has taken a major nosedive in recent years, it is clear that times have changed.