Chennai ranks top among 7 major Indian cities: Knight Frank

By A Harsha Vardhan Published on Jul 26, 2018 02:49 PM IST

Chennai: "Chennai ranks no 1 among seven major cities in India, in terms of lowest unsold residential inventories in the real estate market," said director - Chennai branch, Knight Frank, Kanchana Krishnan.

She said this at the release of the real estate consultancy firm's ninth edition half-yearly report on the Indian Real Estate market and added that 'the market is ready for an upswing'.

'Now' is the time

The situation of the residential market in Chennai, which was bottomed out and saw high unsold inventories in the last two or three years, has changed today, according to Knight Frank

Kanchana said, "We have only 22,000 unsold residential units in the city, thanks to the conservative approach by our builders. Launches that were made based only on market demand are slowly recovering."

According to Knight fank, the market is likely to revive from the next half with residential land prices likely to go up from next year. Now would be a right time for real estate investments, the report said.

The comeback

There is an eight per cent annual upswing in residential project launches in the first half of 2018, Kanchana said. "From January to June this year 6,520 units have been launched, which is the highest number of launches in a single period in the past three years."

The reason for the significant increase in launches is due to the decline in property prices by four per cent year-on-year (YoY) as developers role out aggressive discounts to lighten inventory, according to the report.

"The right-sizing of properties coupled with right-pricing of under Rs 5 million ticket size has boosted real estate market," Kanchana summarised.

The report says that marketing campaigns highlighting RERA (Real estate Regulatory Authority) compliancy, PMAY eligibility and Completion Certificate have helped developers regain buyers’ trust.

According to the Knight Frank report, aggressive discounts on prices have not only helped stem the decline in sales but may also increase property costs from next year

Office sales drop
Though residential has seen a boost in H1 of 2018, there is more room for growth in the office real estate segment, Kanchana said. The report says that inadequate supply continues to limit transaction numbers in office real estate space in Chennai. The city saw just 4.5 mn sq ft of supply since H1 2015 compared to the 4.6 mn sq ft of transaction volume during the same period.

"Transaction levels have also experienced nine per cent drop YoY, when compared to the healthy 10 per cent growth in supply," Kanchana explained.

"However, average rentals have grown by 4.5 per cent yoy. Growth especially was strong across business districts with SBD locations such as Perungudi, Guindy and Taramani that continue to witness above-average rental growth," she added. This has lead to a healthy vacancy level hovering around 11 per cent over past 12 months and occupier demand continuously outstrips supply.