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Chennai, along with Bangalore, is the real estate hub of South India. It is an economic hub and has been listed in “Forbes-Top 10 Fastest Growing Cities in the World“. Chennai’s residential market is considered stable compared to some other metros in India. In the past one year, its residential space absorption has remained stable unlike other tier I cities including Bangalore where there have been a slump. Let us take a look at Chennai residential market in 2012 with the apparent trends and shifts, with special reference to the suburbs bursting with realty vigour.
Chennai residential sector
Chennai has witnessed price rise in many of its localities. As per July-September 2012, average prices in some of the prime locations in the city are:
Average price (Rs/sq ft)
Analysts have predicted that realty development will see migrating into suburban Chennai in the near future. Suburbs are predicted to be where the residential development would be taking place. The reason being that no longer the city’s real estate activity is limited around areas like T. Nagar and most of the central areas in the city are on the verge of inflation.
Old Mahabalipuram Road (OMR), Oragadam, Madipakkam, GST Road, Sriperumbudur, Tambaram, Medavakkam, Oragadam, etc are some of the emerging realty destinations in Chennai. Most of the apartments located in the suburbs of Chennai have witnessed a price appreciation of over Rs 1,000 per sq ft in the last two years. Residential projects are now going beyond Melmaruvathur along NH45, Maraimalai Nagar and Chengalpet in Kancheepuram.
Medavakkam is among the most promising upcoming real estate destinations in India. The suburb close to the Airport saw a 15% price appreciation over the past one year. The average residential property price in 2010 was about Rs 3200 per square feet , which had gone up to Rs 3300 per square feet and Rs 3800 per square feet in 2011 and 2012,respectively.
Old Mahabalipuram Road is another growing suburb where realty development is rapidly sprinting forward. It has witnessed about 20 percent increase in property prices since 2011. The average price per sq ft in this area is Rs 4800.
Thiruneermalai, Madhavaram and Semmencherry are also few of the emerging residential real estate hubs. In Thiruneermalai, the rate per sq ft has increased from Rs 2,500 in 2010 to Rs 3,900 in 2012 and in case of Madhavaram, prices have gone up from Rs 3,300 to Rs 3,900 per sq ft.
South and West suburbs of Chennai are going to see the maximum additions of residential space in the next five years. More than 60 percent of the total residential space is estimated to come up in the South and nearly 30 percent to the West of the city. Knight Frank India has identified Medavakkam and Pallikarni as the top realty destinations in the city. While Medavakkam will see 103% price rise, Pallikarni could rise by 93% over the next five years.
Drivers of residential development
Information technology, allied services and financial services are the sectors which primarily drive the real estate market and dictate the areas of residential development in Chennai.
Apart from IT/ITeS and financial services, Chennai’s economy is driven by the automotive, manufacturing and telecom sectors as well, since the city is home to a large number of automotive companies including Hyundai, Renault, Nissan Motors, Ashok Leyland, Daimler AG, Caterpillar Inc., Komatsu Limited, Ford, BMW, etc. and also shelters telecom giants like Nokia, Siemens, Motorola, Dell, etc. It is ranked 4th in hosting the maximum number of Fortune 500 companies of India.
A lot of job opportunities are being created by these companies and urban population is increasing. Since availability of land is scarce in city areas, suburbs are where the realtors are focusing upon. Astronomical prices of the city properties have made them out of reach for potential home buyers. As a result, more and more number of projects are being launched in the suburban areas and investors as well as end users are going for these projects.
Over the next five years, around 21 million sq.ft of additional office space will be absorbed in Chennai with the southern parts accounting for more than 18 million sq.ft. It will guide the residential developments in these areas.
Challenges for realty growth in suburbs
However, Chennai still has miles to travel before it can boast of favoured environment encouraging residential development in the suburban areas. The Metro rail project and mono rail projects in Chennai are welcome catalysts for realty growth as they will enhance the connectivity of outskirts with the city areas.
Community living as a concept is nascent in case of Chennai, when compared to its neighbour, Bangalore. Integrated townships are the answer to residential needs of the city and steps are being taken towards it. Compared to Chennai, residential supply has been more or less uniform in Bangalore localities. It is also due to the fact that Bangalore market is matured in comparison to Chennai.
The biggest challenge that lies ahead for Chennai realty is to develop the infrastructure in the suburbs. Most of Chennai suburbs still lack social infrastructure. Due to limited land availability; schools, malls, multiplexes, restaurants and supermarkets in suburbs are less in number as compared to other metros. In strategic localities like Oragadam and Sriperumbudur, civic facilities such as water supply, sewerage system or health and recreation facilities are yet to be developed. To be able to witness influx of townships, the civic amenities need to be developed.