For the first time in a decade, the number of new launches of residential units in Chennai fell below 10,000 units in 2017 due to factors like the slowdown in the IT sector and political instability among others, according to Knight Frank India.
“Chennai started on a positive note in the first half of the calendar year and was the only city to see a 4% rise in sales. However, a poor performance in the second half led to negative growth as other factors, such as the GST and the implementation of Real Estate Regulation Act (RERA), had an impact on the sector,” Kanchana Krishnan, director-Chennai, Knight Frank India, said.
The launches of residential units fell by 33% to 3,200 in the second half of 2017 and sales fell 14% to 6,670 units, which led to a dismal annual performance, said the report.
“The implementation of RERA and the launch of buyer-friendly schemes, such as the Pradhan Mantri Awas Yojana, were expected to boost buyer sentiment in 2017. However, the Chennai homebuyer stayed away from the market as weakening prices and the shaky employment scenario, especially in the IT sector, hurt sentiments and encouraged the deferment of purchase decisions,” Knight Frank said in its half-yearly report on the Indian residential and office market for July-December 2017 across India.
Both supply and sales for the Chennai residential market came to their lowest level since 2011 in terms of yearly and half-yearly numbers, the report said. The half-yearly launches and absorption represent an 86% and 56% drop respectively from peak levels during H1 2011.
Offloading inventory
Knight Frank noted that the main focus of builders was on offloading existing inventory during the second half of 2017 by relaunching old products at lower prices, which resulted in a 3% year-on-year reduction in average asking prices. For aggressive buyers, a further 10-15% reduction was available.
“It is a buyers’ market for residential units in Chennai. Buyers are waiting for further price reduction, but such a fall may not continue,” Ms. Krishnan said.
The interest of buyers was definitely more towards properties that are closer to completion, especially in the case of more affordable ones costing between ₹25 lakh and ₹40 lakh in locations such as Kolapakkam, Maduravoyal, Kelambakkam and Siruseri toward the western and southern peripheries of the Chennai residential market, the report noted.
According to the report, the IT and ITeS sectors absorbed just 0.66 million square feet of office space in the second half of 2017. The sector’s share in office space absorption fell significantly to 25% in the second half of 2017 from 43% in the second half of 2016, it added.
The overall transactions in the Chennai office market declined by 12% to 4.5 million square feet in 2017, with a 17% drop in the second half of 2017.
