Rent negotiation during monsoon in Chennai

Are you looking out to rent a property in Chennai? This may be a good time. With the monsoon knocking at the door in Chennai, rental markets in some areas of the city get a fresh look in favour of prospective tenants.

“One can negotiate about 5-10 per cent of rent during this season in certain areas in Chennai,” says Sridhar Varadaraj C, vice president, Hannu Realty. Flooding and drainage problems in many localities are some reasons that give tenants a scope to negotiate. This is often an annual affair.

“Although the monsoons do not have a major impact on the Chennai rental market on the lines of Mumbai or Pune, one can negotiate on rental values with the owner during these times. This is primarily due to the drainage and water-logging issues faced by tenants,” says Varadaraj.

So which are the areas that offer you negotiated rents?

“The low lying areas of Velachery, Porur, Kolathur, Perungudi, Anna Salai, Tambaram, Mugalivakkam, Thiruvottiyur, Besant Nagar, Pulianthope and Vyasarpadi among others are the primary target areas,” says Thomal Ammal, owner of City Gate Consultants.

According to Magicbricks data, while currently Velachary offers properties on rent within the price range of Rs 12,000-30,000 per month, Porur offers in the range of Rs 12,000-25,000 per month. Tambaram rentals on the other hand are in the range of Rs 10,000-15,000 per month and in Kolathur current rental values range from Rs 11,000-22,000 per month. In areas like Besant Nagar, the rental values are slightly higher in the range of Rs 25,000-55,000 and above per month. Most of these units are in the mid-segment category comprising of 2 or 3BHK units.

During the monsoons however, one can easily negotiate for a rental drop of about Rs 1,000-3,000 per month. The negotiation is also dependent on the demand and supply scenario according to Varadaraj C. “For instance, an area like Velachary where demand for rented accommodation is always high as compared to supply, the percentage of negotiation may not be as high as 10 per cent,” says Varadaraj C.

Similarly, in Besant Nagar, one of the prime localities of Chennai, owners are reluctant to bring down rental values by more than 5 -7 per cent, during these months. But in areas such as Mugalivakkam, Perungadi and Tambaram, where road and civic infrastructure is still coming up and the supply matches the demand; scope of negotiation can be as high as 10 per cent or sometimes even more.

This trend is likely to continue for another 2-3 years as the concerned authorities are in varied stages of addressing the drainage and water-logging issues. For instance, Tambaram Municipal Corporation has planned an Underground Sewage (UGS) programme, which is   still in the implementation stage. Wherever sewage construction is happening, concrete roads are being laid above it in an attempt to solve the water logging problem. However, it is not completely ready.

The Chennai Corporation recently held a meeting with other government agencies to churn out plans for the upcoming northeast monsoon. In the meantime, it can rain lower rental values for tenants of these areas.

Source: Times of India / Magic Bricks /Neha Nagpal, Magicbricks.com Bureau
Neha is a writer for over seven years now and has written on industries such as real estate, franchise and outdoor advertising.

Chennai real estate – positive sentiment has seeped

A positive sentiment has seeped into the Chennai real estate

The Chennai real estate sector is slowly bouncing back after a negative spell. There is a spirit of optimism especially after the new government took over the reigns at the centre. “August and September have been very good and we managed to do our numbers during this period. The sentiments are positive,“ says Ajit Chordia, chairman, Credai Tamil Nadu chapter.

Unlike other cities Chennai has always been an end user’s market. With hardly any speculative buying the real estate scenario has witnessed less volatility. Price fluctuations are minimal in the city which works to the benefit of the buyer.

“The residential real estate segment passed through challenging times over last year, with sales velocity slowing down, unsold inventory rising and buyer sentiment largely negative. Post Budget 2014, there has been a perceptible improvement in price-sensitive Chennai and most other southern cities. Increasing the taxable limit from Rs 2 lakh to2.5 lakhs, enhancing the benefits in Section 80C from Rs 1 lakh to Rs 1.5 lakhs and raising the exemption limit on interest payments on housing loans from Rs 1.5 to Rs 2 lakhs per annum will eventually leave more money in the hands of the tax payers,“ says Sanjay Chugh, Head, Residential Services (Chennai) JLL India.

“Compared to the last six months the mood in the market is really positive. The signs are all there. The new government t the Centre has been giving out positive signals, enquiries are up. But decisions are delayed as customers have too many choices,“ says Suresh Jain, managing director, Vijay Shanthi Builders, a well-known construction group in the city .

“The positive impact on business sentiments can be witnessed in the commercial office sector where enquiries from corporate occupiers, mainly in IT-ITeS and media sectors have been healthy since April this year,“ says N Hariharan, Head Commercial Agency , South, Cushman & Wakefield. “But in the residential sector, the ground realities are very different as buyer sentiments are yet to bounce back and the effect of the Centre’s policies on the residential market is yet to be witnessed,“ he adds.

Prime Minister Narendra Modi’s vision of housing for all by 2020 has brought back the focus on affordable houses and a start has been made by offering some sops in the budget. “Projects committing at least 30 percent of their total project costs for affordable housing will now be exempted from minimum built-up area and capitalisation re quirements. These provisions will further accelerate the supply of affordable housing segment in Chennai,“ says Chugh.

But, according to Chordia, Chennai is yet to see any big builder group getting into this segment. “Land costs are so high in Chennai that it becomes difficult for developers to get into this segment. The government has to take the first initiative. The cut in home loan rates has hardly had an impact on Chennai but the good news is that people in the Rs 20,000 to 30,000 income brackets are also now confident of buying a house.“

Jain feels that it is early days and it will take at least a year for the plans to translate into action. But the Rs 10 to 30 lakh segment is likely to get a boost especially with big groups such as Mahindra getting into this sector. Infrastructure along the outskirts of the city is likely to see a spurt, he says. “I would say this is the best time to buy as by 2015 good growth and sustainability of industry will start reflecting in the prices,“ he adds.

In 2012-’13 and into 2014, residential property prices in Chennai have certainly shown a year-on-year increase. However, the rate of appreciation differs according to location and market segments. This is an important factor for property pricing, because Chennai offers options across the luxury, premium and affordable categories in and around the growing suburban corridors of OMR, ECR, GST and Poonamallee, says Chugh.

While this may be true, the state’s economy does have a bearing on the real estate sector. Unfortunately , Tamil Nadu has not been focusing on the IT sector, says Chordia. “Look at the how Bangalore and Hyderabad are aggressively wooing this sector. With SEZ activity also coming to an end here I am afraid we may not see the kind of growth in the real estate sector that we hoped for. The change in the leadership in the state is a concern,“ says Chordia. But the silver lining is the Outer Ring Road (ORR) with social infrastructure such as schools, colleges, hospitals and other facilities coming up along the stretch that is going to be place of action in the future, he adds.

There definitely are visible signs of a recovery with various stakeholders working to overcome the hurdles. To address the demand from a majority of the first-time home buyers looking to buy homes out of their saving, limited exposure to debt and EMIs, developers have ventured out of the city and created new residential areas in the periphery and suburban areas of Chennai. These areas include Perumbakkam, Medavakkam, Kovillambakkam, Vannagaram, Mangadu, Kundratur, Ambattur, Avadi, Chembrambakkam and Oragadam, says Chugh.

“It is especially in these locations that we will now see significantly enhanced demand. Residential supply will also improve noticeably to cater to this demand. By relaxing the minimum area prescribed for getting FDI from 50,000 sq metres to 20,000 sq metres and the minimum capitalisation from $10 million to $5 million, the budget has ensured that midsized developers have access to funding and FDI participation,“ he adds.

“The Central Government is committed to boosting the overall business environment.They are especially focused on industrialization and housing. Hence, developers can expect the market conditions to improve in the short to medium term. However, the recent events concerning the State Government can have an adverse impact on local conditions as one is not sure if governance will take a beating until events unfold,“ says Hariharan.

Jain is positive that the entire game is set to change in the next five years. The real estate sector hopes to benefit from the projected gross domestic product (GDP) of 7 to 8 percent next year. Foreign investments are coming in. the Bangalore-Chennai corridor will ensure development of the entire stretch, companies such as Amazon and Flipkart have announced setting up of businesses here. Even the city corporation is getting its act together setting up Metro water and sewage lines and constructing concrete roads. With the corporation extending its limits more areas will come under the development focus, he says.

Source: Times Property, The Times of India, Chennai

Top Real Estate Developers across major Indian cities

Bloomberg TV India announces the top real estate developers across major cities in India to analyse the most successful real estate firms. 
The real estate sector is a critical driver of India’s economic growth. The sector has been sailing in turbulent waters over the past few years with lot of challenges. To analyze how various challenges are tackled by the individual companies, Bloomberg TV India along with JLL as knowledge  partner announces the top real estate developers for both residential and commercial projects in major cities like Mumbai, Delhi NCR, Bangalore, Chennai, Pune, Hyderabad and Kolkata.

The comprehensive analysis is done based on various parameters like Value of projects which indicates the total units launched by the company;  Launch Price (INR psf) and Average size of units in each project by the company, Sales Velocity; it shows how fast units in a project have been selling; Construction Delays, shows the quantum of delays that has hit various projects and higher the delays, lower will be the scoring given to the company; Price Appreciation to annualise the pace at which price in a particular project is rising, faster the rise in prices of the property the scoring has been given to the company, etc. The secondary factors for evaluating the companies are Price benchmarking, Rental benchmarking; the total space built by the company and vacancy levels for commercial projects by the company.
Commenting on this initiative, Mini Menon, Executive Editor, Bloomberg TV India said, “Bloomberg TV India’s continued pre- eminence as the leading business news channel with niche business content for our viewers. Along with JLL, as knowledge partner we incline to insightful research and analysis to highlight the top real estate players across major cities in India”
Anuj Puri, Chairman & Country Head, JLL India says, “The Indian real estate sector is vibrant with ceaseless transformation, innovation and activity. It is also a hard, demanding taskmaster. Many venture into it with stars in their eyes, but very few make any significant mark. Success smiles only at those with above-average insight and acumen… at people with progressive vision, uncommon courage and zeal.

The developers enumerated in this study are those who beheld the larger picture, then proceeded to add their own masterful brushstrokes to make the maximum impact in brick and mortar. What differentiates them is a deep understanding of what works in this still largely unorganized business arena. This report is based on hard data and demonstrated deliverables, and is the most rigorous study of its kind to date.”

 

 

Source: exchange for media.com Bloomberg TV India

OMR – a revival might be in the offing

Industry experts explain the deglamorization of OMR and that a revival might be in the offing

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Building in Perungudi, Rajiv Gandhi Salai, OMR in Chennai – The Hindu

Rajiv Gandhi Salai (popularly called Old Mahabalipuram Road) was the great Chennai dream. The real estate growth around this 20 km stretch from Madhya Kailash junction to Siruseri was motivated by IT development, and hence its alternative name as the ‘IT corridor’. “OMR’s glorious period was between 2001 and 2008,” begins N. Nandakumar, president, Tamil Nadu, Confederation of Real Estate Developers Association of India (CREDAI). It was when developers, irrespective of pedigree and potential, flocked in with ambitious projects. “Every year, 10,000-12,000 units were being sold.” The rationale was that at least 10 per cent of the 1.5 lakh IT workers employed by companies on this stretch (including TCS, Cognizant, HCL, Ramco Systems etc) would want to buy property around the workplace.

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A view of Old Mahabalipuram Road (OMR) in Chennai – The Hindu

The real problem, says Nandakumar, began when in the late 2000s, pan-India developers stepped in with their expansive projects. “Suddenly, the supply increased from around 10,000 to 30,000 units.” The recession did not help matters, and with job security not guaranteed, buyer sentiment hit a low. In the mid-2000s, people were able to buy property on OMR at Rs. 2,500 per sq.ft and sell it at double the price in just two-three years. Thanks to the over-supply that began in the late 2000s, such appreciation has come to a halt now. There is no question of prices reducing although, as he says “construction costs continue to rise. It is impractical to expect project prices to come down. There may be the occasional developer who wishes to cut down on losses by selling units at a reduced price, but they are the exceptions.”

 

Rajesh Babu, founder-director, RECS Group, a real estate consultancy firm, talks of another problem — the construction of luxury apartments. “These projects are unaffordable for the average buyer. Efforts should be taken to bring units here that are in the Rs. 40 lakh to Rs. 70 lakh range,” he says. Ananth Vummidi, managing director, BBCL, a Chennai developer that has two ongoing projects in Perungudi and Thoraipakkam, respectively, says OMR is not a high-end market. “Potential buyers are discouraged by properties selling for more than a crore. The mushrooming of luxury apartments on OMR is a corrosive trend.”

R. Kumar, chairman, CREDAI-Tamil Nadu, explains that the lull in IT development in this area has caused the target customer demographic to be restricted to the middle class and upper middle class. “Had the boom continued, top-level managers would have been hired and the profile of potential buyers elevated. But that was not to be,” he says. Where there is over-supply, it is crucial that buyers are lured with relevant projects. Price stagnation, affordability and connectivity problems on OMR have all conspired to make localities in west Chennai such as Kolathur and Ambattur more interesting for investors.

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A view from OMR SRP Tools bus stop to OMR Kottivakkam, Rajiv Gandhi Salai – The Hindu

However, the lull is only temporary if the predictions of Nandakumar and Rajesh Babu are anything to go by. “There are encouraging signs since the new central government has come in,” says the former. “I notice a spurt in IT-related activity again, a precursor to real estate development.” Babu believes that with time, old stock will make way for more relevant, new stock that will push demand up again.

Perhaps the biggest development in the corridor is the proposed 1,500-acre township for Japanese investors in Thiruporur. “When this project gets completed in three years, the prices will begin to appreciate again.” Until then, established developers have to sit tight and ride the storm. Should the government policies continue to be investor-friendly, the popular notion is that OMR will be back in the reckoning.

Source: The Hindu Chennai

Is this the right time for an NRI to invest in Chennai?

Are you an NRI looking to invest in Chennai? This might just be the right time for you to take the plunge. Here’s why-

As per the latest survey by ASSOCHAM, Chennai is the fourth preferred destination by NRIs for buying a property. NRI investments are set to surge by 35 per cent as compared to the 18 per cent noted in the previous quarter, revealed the survey. At a time when NRI enquiries are witnessing a revival in India, this might actually be the right time for NRIs to get a good deal in Chennai.

To begin with, real estate markets across the country are witnessing a wave of positivity after the formation of the new government. Everyone is expecting prices to rise in the coming months. The scenario is no different in Chennai. The real estate market in the city is also buoyant on the back of ‘Make in India’ campaign, which is set to provide a boost to the city’s manufacturing hubs. This in turn would lead to creation of additional jobs that would enhance housing needs in the city.

What makes this the ideal time for NRIs to enter the market? “NRI investments have been on the decline in the last few years in Chennai. As India realty was undergoing a lull phase, NRIs had also kept away. Now, with the markets picking up, demand is also expected to rise,” says Maneesh Gupta, director, valuation and advisory services, Colliers International. Thus, at a time when demand is still reviving, one stands a higher chance of getting a better deal.

Developments in the Chennai market are also of interest to the NRI buyer. How? “Most NRIs are looking for a house in the city or a land in the outskirts. They do not mind buying a re-sale property in a central location. Properties, particularly apartments, in the suburbs are not really preferred,” adds Gupta.

At this time, when a lot of re-development activities are going on in the central part of the city, NRIs have options of both re-sale and new properties in these central locations. Most of the new stock being developed in the central zones are in the high to luxury segment and would meet the needs of the NRI customer.

Thus, considering all the points, it does seem a bright time for NRIs to re-enter the Chennai market!

Source: Times of India / Magic Bricks