In a city where two and three-bedroom apartments are considered a safe bet by developers, investors have identified a niche in one-bedroom apartments that pays well.
Large houses may be popular among the end users in Chennai. But in prime locations, investors say the 1-bedroom-hall-kitchen units are worth their while as with lower investments they see good rentals and attractive margins on sales.
"I have a one bedroom apartment in Egmore, a 700-square feet house, I rent out for over Rs 22,000 month. But I struggle to find a tenant for a three-bedroom unit on the Old Mahabalipuram Road in the suburbs to the South of the city," says Mr Joseph Ittiachen, an investor and a consultant in real estate.
Whether in Egmore, Anna Nagar or other such well connected residential areas, there is a waiting list of tenants for small apartments, he says.
Who are such tenants?
Mostly people who have moved to the city on work, he says. Young, unmarried or senior executives who are here for a short time, and are willing to pay to be close to their work spot. People from other cities who will have a family visiting them on weekends and holidays, he said.
The attraction for an investor is that the initial investment is relatively small. With a square foot of built up space costing at least Rs 10,000 in prime areas in the city, a 600 sq.ft house can cost up to Rs 60 lakh. Rents can go up to Rs 20,000-25,000 a month. On the OMR it is possible to get a two-bedroom house for that price but the rent would be just about Rs 15,000-20,000.
Also, the maintenance cost is less at about Rs 2-3 a square foot, daily maintenance is also easy. Such houses are popular in Mumbai, where land prices have skyrocketed multiple times as compared with Chennai.
Mr W.S. Habib of Ramky Wavoo Developers says there is a demand for one-bedroom units in recent times. Just 3-4 years back he had developed a 264-apartment project at Medavakkam, a suburb to the South of Chennai. It had 30 small apartments which were among the last to be sold. The larger 2- and 3-BHK apartments were sold fast. Today in an office-cum-residential project on Nelson Manikam Road, which includes half a dozen 1-BHK units, the sales of small apartments is good particularly among the corporate buyers.
Mr R. Kumar of Navin Housing says the 1-BHK segment is a niche. Demand for small apartments is bound to increase as space gets more expensive.
Another investor said he bought an old single bedroom apartment for Rs 20 lakh, spent Rs 8 lakh on doing it up and sold it for Rs 34 lakh. Among the buyers for the property were single women and the financially independent elderly couple with children abroad.
Developers plan to refurbish small apartments for sales. Ease of daily maintenance is a major factor for the elderly, he said.
Small families will prefer a spacious 1-BHK to a cramped two-bedroom unit of the same size, said a developer. People on a budget will move to smaller spaces within the city before getting fed up with cramped apartments and shifting to a larger place in the suburbs.