Over the last year, a lot of developers in Chennai launched large-scale projects in the suburbs, further away from the city centre, in a bid to reduce per sq. ft cost. However, this led to new challenges such as finding manpower and battling the power crisis. The year ahead will see them take this learning to existing projects as well as some new ones.
Mid-segment growth
Analysts have mapped the growth of the mid-end segment in Chennai at a high rate of about 16 per cent for the last year due to affordability. But they predict prices will rise in this sector in 2013 due to external factors. A.N. Sundar, director, Arun Excello, explains: “Bringing manpower to the suburbs, far from the centre of the city is an expensive affair. Even though we started out on projects outside Chennai with the aim of keeping the per sq. ft cost low, unexpected factors have added to the price rise.”
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Over the last year, in the residential mid-segment, GST (Poteri) followed by OMR saw the maximum growth, in terms of projects launched thanks to affordable per sq. ft costs (between Rs.3,200 and Rs.4,500). Even the rental sector saw a price rise in this particular segment. “Residences in areas like Adyar experienced a sharp increase in rental values of around 40 per cent over the last year, primarily because of high buyer preference for the location advantage that Adyar enjoys, with its amenities and its connectivity to the rest of the city,” said N. Hariharan, office director, Chennai, Cushman & Wakefield.
The year that was
The last year was one of innovation, with marketing departments of real estate companies working overtime to ensure their projects reached buyers. “Given that construction cost, development cost, cost of land and time taken for approval have all been on an upward tangent, developers have not been able to lower costs and took to innovative marketing and pricing strategies to ensure better responses,” Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield, says in his report on the sector.
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Activities on OMR and GST Road, continued at a good pace all through 2012 with the former seeing a lot of residential launches, both in the villa and apartment formats. “The mid-end segment witnessed a large number of launches on GST,” Hariharan says. With the extension of Chennai corporation area limits till Shollinganallur, better civic amenities have finally arrived on the OMR stretch. Connectivity is expected to improve to the GST once the Metro work is complete.
For first-time buyers
The focus in 2013 for most developers will be on first-time home buyers looking to invest in small homes outside the city. Keeping last year’s investor response in mind, developers will have to trim the extra amenities that increase the burden of maintenance on home owners. The focus on large pools and club houses will reduce, as will complete power back-up solutions, given the power crisis in Tamil Nadu. Anuj Puri, chairman and country head, Jones Lang LaSalle India, predicts: “It is extremely doubtful that freebies and other incentives will prove to be much of a boost. The only way to improve sales at this point is to offer tangible financial relief. We are likely to see drastic trimming of frills.”
Sundar agrees: “We will be focussing on compact homes that offer basic amenities. The last year saw a lot of investors jumping in and picking up over three to six units, even in compact projects. Next year, our focus will be on first-time home buyers who are looking at a price point of around Rs. 15 lakh in the suburbs. We are actively looking for land in places like Ambattur, Avadi and Guduvanchery where home buyers can settle peacefully.”
While the city is not new to the concept of apartment buildings, developers say maintaining newer amenities such as swimming pools and club houses have become really difficult. To tackle this problem some real estate companies have started a separate wing within their company to focus on maintenance work. This diversification of realty firms to allied areas has been an interesting trend that will continue in the next year as well.
Chitti Babu of Akshaya Homes, who ventured into education with the announcement of Akshara Kindergarten School this year, says, “We will also be moving to other verticals including healthcare and senior citizen homes.” Akshaya not only aims to launch one project during every month of 2013, but to also make all the projects green, CRISIL-rated and disabled-friendly.
Way forward
Developers will have to continue to innovate to keep investor interest sustained in 2013 as well. If so far the perks within projects and extra amenities were bolstering sales, in the coming year buyers will look more towards financial perks. “Developers will offer buyers attractive pre-launch benefits in a bid to accelerate sales momentum in the initial months following a launch,” Puri says.
Although the rest of the country will see a spike in residential launches in the coming year, it is expected that Chennai, along with Bangalore, that saw a record number of launches in the last year, will see a reduction in terms of new launches even as developers focus on successfully handing over the existing projects, perhaps even at discounted rates.