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OVERVIEW
Chennai real estate market has been stable with moderate price
appreciation of 8 – 10% in 2012. With inprogress infrastructure projects
taking shape, the demand and capital values are expected to rise across
all sectors. Focus on improvement of public modes of transport has been
one of the major highlights in Chennai. This is evident from the expansion
of the existing highways, work on Chennai Metro and the Outer Ring
Road.
Approval of three new bridges connecting ECR and OMR at Neelankarai,
Palavakkam and Kottivakkam is expected to impact the capital values.
Going forward growth in Chennai would not solely be determined by the
IT/ITES sector, but also the transport corridors of the above mentioned
infrastructure projects. Chennai market is looking forward to the MRTS
and BRTS projects to give the city a new face in 2014-15.
2012 has seen the city shift investor focus from the usual OMR, ECR to
the WEST and NORTH of Chennai. The operationalization of the TIDCO &
Ascendas SEZ at Tiruvallur and the operationalization of the new airport at
Sriperumpudur in 2015 is driving interest in the North & West Chennai
regions.
STOCK AND ABSORBTION
Global uncertainties and IT/ITES sector going slow with their expansion

Going forward growth
in Chennai would not
solely be determined
by the IT/ITES sector,
but also the transport
corridors of inprogress
projects

plans impacted the real estate scenario in Chennai with high vacancy rate.
Though the focus on residential sector from developers end was high, and
Chennai market saw remarkably high number of new launches in 2012.
Sales were moderate in comparison to the new residential supply added to
the market. In 2013 Chennai residential market is likely to see few
launches compared to 2012 but improvement in sales with an overhang of
18-22 months.

16% 1% 15%

68%

What we see is in
South Chennai,
across all budget
ranges more than
50% units are
available indicating
piled inventory

CENTRAL

NORTH

SOUTH

WEST

Chennai Residential Market Zone Wise Distribution of Stock
Source: IndiaProperty
20000
15000
10000
5000
0
CENTRAL

NORTH

Ready 2 Occupy

SOUTH

WEST

Under Construction

Chennai Under-Construction vs. Ready to Occupy Stock
Source: IndiaProperty

12000

If the current
sluggish growth of
IT/ITeS sector
continues South
Chennai is
expected to face an
oversupply
situation. Another
area of concern is,
lack of basic
infrastructure

70%
60%
50%
40%
30%
20%
10%
0%

10000
8000
6000
4000
2000
0
Less than 30 - 50 Lacs 50 - 75 Lacs 75 - 1 Cr Above 1 Cr
30 Lacs
No. of Total Units

% of Available Units

South Chennai Residential Market Absorption - Stock and Availability
Source: IndiaProperty

The above graphs highlight the current residential market scenario of Chennai.
With maximum new launches and construction happening around OMR and
GST Road belt, South Chennai is seeing maximum growth. Concentrating on
South Chennai, for all the budget ranges more than 50% units are available
indicating piled inventory.
If the current sluggish growth of IT/ITeS sector continues the area would face
an oversupply situation. Moreover, lack of basic infrastructure (roads, water,
and sewage system) would heighten it further.
CAPITAL VALUES
Residential Property Rates for Mid Segment Properties in Major Micro Markets
in Chennai:
MICRO MARKET

CAPITAL VALUE (INR psft)

Porur

4500 - 5000

Guduvanchery

3000 - 3200

Vandalur

3000 - 3300

Oragadam

2800 - 3500

Navalur

4500 - 5000

Medavakkam

4300 - 4500

Akkarai (ECR)

INR 2 – 2.5 Cr (Only Villa Projects)

On comparing the prevailing market rates in Chennai residential market to the
property rates consumers are ready to pay; micro markets Medavakkam,
Guduvanchery, Oragadam and Vandalur have comparable pricing.
The increase in pricing of Porur and Navalur residential market over past four
quarters has led to a demand and supply mismatch. What is typically seen is
when prices increase in a certain market, it forces the mid income buyer
segment to shift focus to lower priced micro markets.
In 2013 we expect these markets to have stable pricing.

120%
100%
80%
60%
40%
20%
0%

Over the past four
quarters Porur and
Navalur have been
hot markets and
have seen an
increase in pricing

Less than 30

30 - 50 Lacs

50 - 75 Lacs

75 - 1 Cr

Above 1 Cr

Price Preference of Consumers for Various Micro Markets in Chennai – Overall Pricewise
Source: IndiaProperty

120%
100%
80%
60%
40%
20%
0%

Less than 2000 psft
4000 - 5000 psft

2000 - 3000 psft
Above 5000 psft

3000 - 4000 psft

Chennai Popular Micro Markets Pricing Preference by Consumers – On Basis of Rate psft
Source: IndiaProperty

DEMAND FOR TOP LOCATIONS IN CHENNAI
VELACHERY
SHOLINGANALLUR
MEDAVAKKKAM
URAPAKKAM
TAMBARAM
PORUR
AMBATTUR
Chennai Demand for Popular Micro Markets over Last Three Quarters
Source: IndiaProperty

MARKET TRENDS
The suburban micro markets of Porur, Poonamallee, Pallavaram, Chrompet and
Tambaram which witnessed fresh launches in 2012 are expected to appreciate by
7 – 10 % in 2013. Other micro markets to look for are Ambattur, Avadi, Kolathur,
Madipakkam, Medavakkam, Pallikaranai, Thiruporur, Urapakkam, Velachery.

Iyyapanthangal
Siruseri
Kelambakkam
Sholinganallur
Poonamallee
Madipakkam
Velachery
Chrompet
Kolathur
Urapakkam
Ambattur
Medavakkam
Tambaram
Porur
0%

1%

2%

3%

4%

5%

Q 3 (Oct – Dec 2012) - Chennai Micro Market Ranking for Consumer Demand
Source: IndiaProperty

6%

80%

Preference trends
for new and resale
properties have
beaten the
conventional
notion that
consumers prefer
only new houses –
focus on budget

70%
60%
50%
40%
30%
20%
10%
0%
New

New/Resale

Resale

Q 3 (Oct – Dec 2012) - Chennai Preference towards New and Resale Properties
Source: IndiaProperty

>6 Months

Shift seen in
consumers’ intent
to make property
purchase – wait
and watch strategy

<6 Months

<4 Months

<2 Months

0

1000

2000

3000

Qtr3

4000

Qtr2

5000

6000

7000

Qtr1

Time Frame in Which a Consumer Desires to Make Property Purchase
Source: IndiaProperty

8000

4000
3000
2000
1000

1 BHK

2 BHK
Qtr1

Qtr2

3 BHK
Qtr3

Chennai Price Movement Consumer Budget Preference
Source: IndiaProperty

Focus of buyers in Chennai residential market over last three quarters has been
on 2BHK properties with 35% consumer demand having a budget of INR 30 –
50 Lacs. This indicates need for more and more affordable and mid income

Clear indication
seen for affordable
and mid income
residential
properties

residential properties in the city. Properties of Rs 1 Cr show only 10% demand.

Shift in demand for
2BHKs with over
65% consumer
demand
1 BHK

2 BHK

3 BHK

4 BHK

5 BHK

Q 3 (Oct – Dec 2012) - Chennai Unit Type Preference
Source: IndiaProperty

Investors go to areas which have potential end-user participation. Increase in
number of buyers concentrating on mid segment residential properties, has led

Above 1 Cr

75 - 1 Cr

50 - 75 Lacs

30 - 50 Lacs

Less than 30

Above 1 Cr

75 - 1 Cr

50 - 75 Lacs

30 - 50 Lacs

Less than 30

Above 1 Cr

75 - 1 Cr

50 - 75 Lacs

30 - 50 Lacs

0
Less than 30

Focus on 2BHK
properties - 35%
consumer demand
seen within budget
of 30 – 50 L

With an eye
towards potential
rental income,
preference for
2BHK units is more

to 2BHKs being the most preferred unit type in Chennai with over 65%
demand over last three quarters of 2012.
This trend is generally seen with most investors eyeing potential rental income
from 2 BHK residential units which are easy to rent.

CONCLUSION
In 2013 Chennai real estate market is expected to see stable growth with
moderate appreciation. The residential market is likely to see few launches
with focus on reduction in the inventory overhang which currently lies between
6 – 8 quarters. With heightened Government’s focus on improving the
infrastructure scenario, an increase in interest for commercial as well as
residential properties is likely to be seen.


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