Kalpana Murthy writes about the growth of high-end, luxury properties in Chennai
Traditionally, Chennai has been a real estate market where local developers offer large spaced residential units. From 2006-07 onwards, a few local and some national developers that had entered the markets started offering similar large units, but with good interiors and a host of premium amenities and facilities, thus earning the tag of ‘luxury housing or premium housing.’
After the positive response to these luxury offerings, many more developers started focusing on this segment, and soon independent villas and apartments with private swimming pools, gymnasiums, clubhouses, and plush gardens became a reality.
The demand for well-planned residential units with modern amenities has seen an upswing in Chennai in the last four years. This is because of the availability of well-planned villas and bungalows at 'comparatively' cheaper prices with respect to other metros such as Mumbai and the NCR. A high-end penthouse or a bungalow, typically 2,000-4,000 sq. ft in area, in Chennai is priced anything between Rs. 2 crore and Rs 10 crore, whereas prices for similar properties are much higher in the other metropolitan cities. In fact, the past few months have seen Chennai emerge as one of the few cities in India to witness a huge surge in both the number of enquiries as well as sales of luxury or high-end residential properties. This is also borne out by increase in the number of project launches in the luxury housing segment in Chennai in the last few months as more and more developers venture into this area with plans of constructing ultra luxurious projects.
Given that the office market scenario is subdued, developers have started planning high-end residences even on locations best suited for commercial development. Also, at the prevailing high land acquisition costs, it makes commercial sense for developers to invest in residential projects as they feel their return on investment is better than rental returns from commercial or retail spaces.
There are several factors that have contributed to this increased appetite for premium projects, that too at a time when the pile of unsold housing inventory across the country is only increasing. Being the capital of Tamil Nadu and one of the few metropolitan cities in South India to have a good infrastructure framework, Chennai has seen significant economic growth. Unlike other metros, Chennai is not dependent only on the IT-BPM sector. Other sectors like automobiles, telecom, leather and other manufacturing industries contribute substantially to the economy of the city. This, in turn, has created a huge number of job opportunities and has substantially increased the number of people migrating into the city. The in-migration has further contributed to expat population growth, increase in dual income households and growth of nuclear family set-ups resulting in an increased demand for penthouses, condominiums, villas and independent bungalows in the high-end segment. Moreover, investments from NRIs, growing urbanisation and rapid growth of services industries are some of the other factors responsible for this demand.
This demand for premium properties can be witnessed not just in select micro markets, but across the city as there is greater affordability from various strata of society -- whether industrialists, senior IT executives, corporate heads, or HNIs from the business communities.
Locations such as the East Coast Road (ECR), Nungambakkam, Besant Nagar, Anna Nagar, Boat Club, and Poes Garden are some areas where there is high concentration of luxury or premium properties. Proximity to the seashore in ECR is an added attraction to the expat community, which loves beach homes.
Also increasing is the availability of these housing units in different formats like integrated townships, standalone projects and penthouse apartments, in city peripherals such as OMR and ECR.
Since 2010, all major micro markets in Chennai have seen an upswing in both rental values and capital values for luxury housing units. For elite locations like Boat Club and Poes Garden, buyers have to shell out at least 35-40 per cent more now compared to what they had to pay three years ago. The rental values for high-end units in localities such as Anna Nagar, Nungambakkam and Adyar have recorded even higher growth and these areas now command rates that are approximately 60-100 per cent more compared to 2010.
Going forward, it can be safely said that high-end, luxury housing projects will continue to find demand in the city given its diverse socio-economic profile and economic sustainability backed by the manufacturing, IT and other service sector activities. However, developers and buyers will have to pay heed to the current scenarios in other cities and ensure that they do not create similar oversupply situations, which will affect both stakeholders adversely.