Chennai’s residential property market has been facing pressure on sales for some time now. With unsold housing stock at 57,111 units at the end of the third quarter this year, it will now take 36 months to clear the inventory. However, overall housing sales improved by 12.7% q-o-q in the Jul-Sep 2014 quarter with 4,924 units sold during the quarter when compared to 4,369 units in the Apr-Jun 2014 quarter, according to JLL’s periodical survey. Improved home buying sentiments along with festive discounts are attributed as major factors that turned the corner.
While select developers have agreed that the quantum of enquiries are up recently, the conversion takes a little longer due to anticipation that the home loan lending rate would come down in the coming months. Whereas, plotted development projects have not been impacted by the slow down witnessed in other categories of the residential property.
New launches have declined by 57.4% y-o-y in Jul-Sep 2014 quarter amid stringent approval processes. In this quarter, only 27 apartment projects and seven villa projects entered the market with 4,175 units. The city also witnessed the launch of five luxury home projects during the same period. Capital values in the Southern and Western Suburbs remained unchanged as developers chose to clear excess inventory. Besides, multiple housing options added pressure to both capital values and rental growth. Whereas capital values in Northern Suburbs and premium sub-markets rose as new launches were introduced at above average prices.
Price stagnation will continue in the short-term as home buyers have multiple options now unlike earlier, said Vasanth Raghunathan, assistant manager, JLL, Chennai. In particular, apartments in far-away suburban locations will stagnate due to weak demand, he added.
In a related development, the state government sanctioned Rs 204 crore to develop a new 1.4 km long link road that will connect Neelankarai on ECR which will join the radial road at Thoraipakkam Junction on Old Mahabalipuram Road (OMR). This link will significantly reduce the commuting time to ECR and is supposed to improve the value of real estate in and around Thoraipakkam Junction. In fact the Thoraipakkam-Pallavaram Road has already evinced keen interest among several property developers to undertake residential development in view of the improved connectivity levels and response from home buyers.
Similarly, the ongoing construction of the Outer Ring Road (ORR) Phase 2 from Nemilichery and Minjur along with the proposed Peripheral Ring Road (PRR) project is expected to improve demand and capital values of residential projects in the far-off suburbs.
Source: Times of India / V Nagarajan, Magicbricks.com Bureau