CHENNAI: After witnessing a drop in sales for the last five years, Chennai’s residential property market seems to be picking up, posting a minimal annual increase of 3 per cent. According to property consultant Knight Frank’s report, Chennai witnessed sale of 15,520 residential properties in 2017. This year, it rose marginally to 15,986.   The report blamed the sluggishness, witnessed nationwide, on the crisis in non-banking financial companies, which had squeezed the flow of credit to both developers and home buyers. In Chennai, the effect was more pronounced on buyers as disbursal of home loans took a hit. 

This is for the first time since 2012 that Chennai has witnessed a growth in sales, however marginal. The report also found that sales was concentrated in the `50 lakh-ticket size. Preference is for ready-to-move homes and highest launches were witnessed in South and West Chennai -- each recorded 48 per cent of total launches made in the second half of 2018 in the micro markets. 

“Sales are concentrated in two categories -- the `30-50 lakh segment and ready-to-move-in ones. The former category is in demand owing to affordability while the latter is picking up because there is no GST and no risk of project delays,” says Kanchana Krishnan, Chennai Branch Director of Knight Frank.  
“The growth in sales should be viewed as green shoots of recovery for a market that has registered sequential decline,” says Kanchana.

Interestingly, the report states that the developer community is still struggling to find their feet in the real estate, as doing business has become difficult due to escalating cost of construction and a market driven price reduction of up to 3 per cent.

Kanchana says that launches have slowed down as developers are awaiting the implementation of Tamil Nadu Combined Development Regulations (TNCDR) and Building Rules 2018, which will bring into effect the increase in Floor Space Index from 1.5 to 2 for all types of buildings in the State. The residential unsold inventory has gone up from 14.2 quarters to 14.5 quarters.

Office Space
It is the office space which has been a cause of concern for Chennai as new supply fell by 81 per cent year on year during the second half of 2018. The transaction volumes weakened by 33 per cent in the same period. Although there is a silver lining. The report predicts an addition of 24 million square feet by 2021-22, which is expected to ease supply.