Chennai's property sector shows growth

The Hindu

What's in store for the real-estate industry this year?Here's a look at where to invest in Chennai and the impact of the Budget onhome loans

RINI MUKKATH & JANANE VENKATRAMAN

Chennai's residential property market has this past year experienced a steady growth in terms of its pricing and offerings. Primarily an end-user driven market, Chennai's developers have been able to retain and attract new customers with consistent pricing.

While it is expected that interest rates will decrease over the course of 2012, this will result in greater demand for housing in 2012. “The demand for real-estate is on an upward curve this year, also with the softening of the interest rate, there will be a positive impact on pricing and it is definitely the best time to invest in property,” says Siva Krishnan, Head - Residential Services (Chennai) Jones Lang LaSalle India. Apart from OMR, ECR, Mogappair, Sriperumbudur, Poonamalle, Ayyapanthangal, some of the areas to look out for are, “Perungudi, Medavakkam, Pallavaram, Porur, Chromepet, Tambaram are the best areas to invest this year. Due to the affordability index of real-estate in the central areas being high, there is a definite shift towards areas a little further away,” he adds.

S Prabakar, managing director, S&P Foundation echoes the sentiment. “Chennai has generally been a very good market when compared to Hyderabad and Bangalore. It is only going to pick up further.”

Affordable housing has been given space in the Budget 2012 – 13, with the government allowing for External Commercial Borrowing. This will provide extra capital for builders and the developers in the low cost housing sector. The one percent subsidy on interest rates for houses costing up to Rs 25 lakhs or for loans up to Rs 15 lakhs is seen as a welcome move from the developers. D. Pratish, managing director, VGN Developers, says, “Yes, this is a very good incentive for developers in the low cost housing sector. Even though the raising of service tax and excise duty is a hurdle, this comes as a small relief for both the developers and the buyers.”

Home buyers have a reason to feel optimistic this year. For one, the RBI seems to have gone on a reducing spree on account of the Cash Reserve Ratio (CRR). CRR is the portion of money that the banks have to keep with the central bank. Reducing the CRR means there will be more cash on hand for the bank to lend. Hot on the heels of slashing the CRR by 0.5 percent in January, the RBI further slashed it by a 0.75 percent, thereby injecting around Rs 42,000 crore of liquidity into the system. This frees up more money for the banks to lend.

S Vasudevan, president, Embassy Group about interest rates, “There might be more money available for the banks to lend, but whether this translates into more people coming forward to take housing loans really depends on the interest rates.”

But more positive news is in the offing. “Post budget, people are deferring their purchases because there is a slight chance that the interest rates might come down. What is 10.5 to 11.5 percent might be reduced to 9.5 to 10.5 percent interest for housing loans. We just have to wait and watch”, he adds.

Moving to the Suburbs

With residential space at its peak in the city, consumers can now invest in property in the suburbs. The increased demand for housing in Chennai is seeing the city expanding towards the suburbs. Also, with better infrastructure and connectivity to the city it's no longer unusual to live and invest in the outskirts. All the major builders have gated communities, high-end apartments, villas and bungalows on offer. There is definite shift in lifestyle preferences amongst the people of the city and amenities like gym, pool, landscaped gardens attract customers