Friday, January 23, 2009

Chennai Real Estate - It's a Consumer's Market

Undergoing the period of correction for the past 6-months, Chennai real estate markets have finally started to stabilize, however the demand curve is still observed moving horizontally. As per industry reports, the city absorbed a meager 13 per cent of the total supply of the residential space in the past quarter.


Chennai real estate received fresh additions of 3.4 million sq. ft of housing in the past quarter although a meager 0.47 million sq. ft of space was absorbed, studies point out.


Now that the prime banks like SBI, HDFC and ICICI have cut the interest rates on home loans, the markets are likely to catch up and real estate developers expect good time ahead this winter season.


Impact on prices


According to the Chennai based professionals, capital values in the residential real estate in Chennai had reached staggering levels that in fact were termed as unrealistic by buyers.


But now prices are almost down by 20 per cent, says R Ajay of Tirupati Real Estates. "But you cannot actually gauge that whether price corrections are spiking demand or not. Most of the new projects in the property markets of Chennai are actually making an oversupply and there is no junction between the volume of demand and supply," he adds.


Meanwhile, the prices of residential units in the sub-urban areas have moderated at the levels of Rs 2,500-4,000 per sq. ft, after peaking at Rs 5,000-Rs 6,000. The basic notion behind development of sub-urbs is generally low price range and if this factor escalates, there is no point people will consider buying properties in sub-urbs, Professor Raghu Aiyar commented.


Also, the investors who were expecting instant returns of 25-30 per cent on their property investment in Chennai are at tenterhooks, as the markets have been gradually shedding off all the speculative tendencies.


Outlook


It's a consumer's market. Chennai Real Estate will add as many as 25,000 apartments in the next 12-24 months, from more than a dozen of townships alone and construction of standalone apartment buildings will further accumulate over the total additions.


In this scenario, the supply side would outstrip demand curve and of course, property sellers and developers have to downscale their margin expectations, say market analysts.


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