The significant ramp-up in supply and shoring up of demand is good for the Chennai
real estate market, which has been under pressure for some time. Besides the overall slow demand for properties across the country, Chennai has been marred by some of its own issues – from political uncertainty to building collapses (due to flouting of development norms) and the floods have hit the market in the past three years, according to the research report.
The report further says that the implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA), and the launch of the Pradhan Mantri Awas Yojana in 2017 are yet to boost the sector significantly.
Factors like falling prices and the current bleak investment outlook for real estate, thanks to high prices and ticket sizes, have had a much greater impact on demand. "The unstable employment scenario, especially in the IT sector, has also hurt sentiment and encouraged the deferment of homebuyers’ purchase decision," the report states.
As far as growth in supply during the first half concerned, larger supply at lower prices also saw buyer interest increasing and the fall in sales getting stemmed to an extent – down from 14 per cent during second half of 2017 (year-on year) to three per cent during January-June 2018.
While the number of units launched during the period saw an increase, developers continued to focus on offloading existing inventories by re-launching old products at lower prices and in smaller configurations, wherever possible, to attract buyers. This resulted in a four per cent year-on-year reduction in the average asking price, besides a further 10-15 per cent drop on the negotiating table for aggressive buyers.
The transaction volumes during first half of 2018, were subdued during, down by almost nine per cent year-on-year, compared with a healthy 10 per cent growth in supply.
The Chennai office space market, which has been reeling from and acute supply crunch over the past three years, saw some respite during the first half of 2018, with 0.11 million sq m (1.2 million sq.ft.) coming online.
However, the information technology (IT) and IT-enabled services (ITeS) sector took up only 0.04 million sq m (0.47 million sq.ft), translating into 27 per cent of the total space transacted during the first half of 2018 – a significant and steady growth from the 43 per cent seen during second of half 2017. The sector, the largest consumer of office space in the city, is currently experiencing a slowdown and the effects are visible in its consistently reducing share of the total transaction pie.
The vacuum was somewhat filled by the banking financial services and insurance (BFSI) sector and other services, which continued to take the space in the past 18 months.
D&B TransUnion, Barclays Bank and Citibank accounted for more than half the 0.39 million sq ft space that was transacted by this sector.