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Chennai Real Estate Market: Builders’ Outlook A number of surveys conducted over the last one year have clearly exhibited the buyers’ sentiment for the real estate market. In 2013, the sentiment was particularly low on account of a general economic slowdown. Rising interest rates, depreciating rupee and high inflation rates had a major impact on the Indian real estate market. As such, sales were low and property buyers across the country were following a ‘wait and watch’ policy in anticipation of a stable government post General Elections. The Chennai real estate market was no different. Sentiments were low and sales were comparatively less. Hence, builders had to think of ways to grapple with such a scenario. While buyers are eagerly waiting for a stable government post Elections, builders, on the other hand are also hoping for some major sales traction. However, in order to understand the views of the Builders’ on the current real estate scenario in Chennai, CommonFloor recently conducted a survey which clearly highlighted the current real estate trends in the city, the areas to watch out for in 2014 and the key preferences of buyers while selecting properties from the builders’ perspective.

Fig. 1 Type of cities which will see maximum appreciation The survey result clearly indicated that between Tier I and Tier II cities, the former will see maximum appreciation. Fig. 1 shows that a whopping 99 per cent of the participants feel that Tier 1 cities will see maximum appreciation in property. It has been seen recently that various Tier II cities have gained prominence owing to rapid realty development and these cities have seen good property appreciation over the past few years. However, this survey clearly highlights that while Tier II cities might be emerging as viable property destinations, Tier I cities like Chennai are still considered a safer bet.

Fig. 2 Region in Chennai better for Investment The builder survey on Chennai real estate market indicates, as shown in Fig. 2, that South Chennai is, by far, the best option for property investment followed by North, West and lastly, Central region. The southern region has seen maximum new launches over the last year and demand in this region is mainly fuelled by the IT/ITeS sectors. On the other hand, the northern region is primarily an industrial area where real estate demand is driven mainly by the middle-class population of the business and trader community and also public sector employees, railway workers and port employees.

Fig. 3 Market segment most suitable for New Launches Chennai real estate market is mostly end-user driven. As a result, the residential market was more or less stable during 2013 as compared to other metros like Mumbai and Delhi. Realty demand is driven by various sectors including IT/ITeS, financial services, allied services, automotive, manufacturing and telecom sectors. According to Fig. 3, the mid-segment emerged the most suitable for new launches with 70 per cent participants feeling that this segment has maximum demand.

Fig. 4

Type of property with maximum buyers’ interest The housing demand in Chennai is mainly driven by various sectors such as IT/ITeS, automobile and manufacturing sectors. Thus as per the property type, buyers’ interest was largely inclined towards multi-storey apartments with basic amenities followed by plots, luxury apartments and lastly mixed-use development projects. According to Fig. 4, about 77 per cent buyers interest were skewed towards multi-storey apartments with basic amenities such as lift, play area, swimming pool, etc. As plots score over other property types for higher returns, 15 per cent buyers’ preferred investing in plots. Luxury apartments and mixed-use development project that includes school, hospital, shopping mall, etc. recorded a minuscule demand of six per cent and two per cent respectively.

Fig. 5 Property size most preferred by buyers Property size is the dais on which the major course of life depends. As Chennai’s market is witnessing an increased demand for mid-segment properties, the survey (as seen in Fig. 5) found that 900-1200 sq. ft. is the most preferred property size in Chennai, majorly a 2BHK unit. This was followed by 1200-1800 sq. ft. with 25 per cent buyers’ interests for little larger units. Only 18 per cent of the participants voted for single dwellings or studio apartments of less than 900 sq. ft. Large swanky homes sized between 1800-2500 sq. ft. and above were the least preferred.

Fig. 6 Most Important amenities for the customer While looking for a new house, building amenities play an imperative role in finalising a property. As apartments lack enough space for kids to move around freely and play, separate kids play area is the most important amenity for maximum customers as seen in Fig. 6. With lifestyle aspirations on the rise, club house was the second most-preferred amenity while selecting a project. And with regular power-cuts in Chennai, these amenities were followed by 100 per cent power back-up.

Fig. 7 Maximum maintenance amount customers are ready to pay every month Once the possession date is issued, owners are liable to pay maintenance charges, which includes the necessary costs required to maintain the building, lift, terrace, and other amenities. These charges usually differ from project to project and city to city. However, according to Fig. 7, majority of the customers are ready to pay monthly charges of Rs 500-1,000 followed by Rs 1000-3000. Very few customers are game for paying more than Rs 3,000 and above on a monthly basis.

Fig. 8 Most significant factor for customer while selecting a developer Today, market is flooded with both the well-established developers and new developers. However, selecting one can be a herculean task. Our survey captured the pulse of the market and analysed the important factors while selecting a developer. Maximum participants, as seen in Fig. 8, feel that brand value and construction quality of the developer are the most important factors. Thus, according to the survey, about 33 per cent buyers would go for well-established developers. This was closely followed by the performance and quality of the past projects. Very few participants preferred referrals from friends and relatives.

Fig. 9 Most vital aspects developers must offer customers

For most of us, buying a house is the biggest buy of our life which consumes a lion’s share of our savings. Thus, as per Fig. 9, good quality construction is the most vital aspect that developers must surely offer their customers. With projects getting stalled in most of the cities, about 27 per cent of the buyers’ want timely possession. After-sales services and flexible payment plans were also preferred by a small number of buyers. However, subvention schemes such as no EMI till possession was least preferred.

Fig. 10 Stage of construction buyers usually prefer to buy property Pre-launch, under-construction or ready-to-move-in — which is the best stage to invest in a property? This is a debate that has found no concrete conclusions ever. Due to sheer attractiveness in terms of monetary benefits, according to Fig. 10, maximum number of buyers preferred to invest in under-construction stage. However, with several projects getting delayed, 32 per cent buyers’ opted for ready-to-move-in apartment. Though, idea of investing in a pre-launch stage usually crosses every investors mind, but due to several risks involved, very few buyers preferred investing in a pre-launch stage.

Fig. 11 Buyers’ preferred wait period after buying property After a buyer has invested in a property, they expect timely possession so that one can move in. This is mainly because of the increased pressure of the EMIs and monthly rentals on the buyers. Thus, maximum buyers can wait for 6 months to one year for their property to be constructed, revealed the survey as shown in Fig. 11. Very few buyers can wait for more than a year.

Fig. 12 Offers that appeal the most to customers

In order to stand out in the world of cut-throat competition, developers these days offer several freebies to lure prospective home buyers. But what attracts the buyers most? With property values going over-board, according to the survey, more than 80 per cent of the buyers, as seen in Fig. 12, preferred discounts on per sq. ft. price. This was followed by festive offers where a developer offer gifts such as free car, jewellery and others. Conclusion Builders’ often do an extensive research before they actually launch any of their project. Their research is based on various parameters including locality check, current trends in real estate market, buyers’ preference etc. It is only after a thoughtful and detailed research that he launches a particular project. CommonFloor’s Builder Sentiment survey, thus, reflects their perception of the real estate market and the growing trends based on consumer demand. The survey has, in detail, highlighted the developers’ perspective of the Chennai realty market and its consumers.

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Chennai real estate market: builders’ outlook  

A number of surveys conducted over the last one year have clearly exhibited the buyers’ sentiment for the real estate market. In 2013, the s...