‘Diverse Economic Base, Growth of Office and Manufacturing Spaces Drive Residential Demand in Chennai’

Chennai, 2nd July 2019: Guindy- Mount Poonamallee Road and Pallikaranai- Medavakkam and PTR Road along with their vicinities have over the past year emerged as the strongest residential hotspots in Chennai, according to JLL’s latest report titled JLL’s Tour of India’s Top Residential Hotspots released today.

Good connectivity with other key locations in the city, robust road network and well-developed social infrastructure have made the two hotspots perform well over other regions, according to the report. Huge demand for residential units in these two regions is likely to support price appreciation.

JLL today also released its national report, Residential Market Update – H1 2019. According to the findings of the report, on a pan-India level, sales are expected to remain strong despite modest new launches in the country witnessed during the first half of the year (H1 2019).

According to the update, within the country’s top seven cities, residential real estate market witnessed an increase of 22% in sales at a pan-India level during the period, it said. Interestingly, the share of affordable and mid-income housing (ticket size of up to INR 10 million in Mumbai and INR 7.5 million across other cities) in new launches, has remained significant at 58% at the country level, the report added.

Launches

H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 H1 2019

Chennai 8751 6157 2370 6702 8596 5328 4189

Source: JLL REIS

In Chennai, new launches have dropped by around 50%, according to the update. But the share of affordable and mid-segment housing in new launches is currently 80%.

SALES

H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 H1 2019

Chennai 9227 8036 5255 3885 8237 6186 7660

Source: JLL REIS

Against the larger national trend, sales in Chennai are yet to gain significant traction. Sales grew by 24% over H2 2018, however it is yet to match the levels of H1 2018. Prices remain range bound and developers have continued to push existing inventory, the report said.

Sales across the top seven cities are likely to receive a further fillip with progressive policies of the government. “Series of reforms and rising buyers’ interest in the segment have propelled the sector to align itself to the market demand. Interestingly, in most cities, homebuyers continue to focus on ready to move in projects and projects nearing completion. As a result of this shift in buying preference, developers too are focused on completing their ongoing projects,” said Ramesh Nair, CEO & Country Head, JLL India.

With developers focusing on delivery of already launched projects, new launches of residential units decreased by 11% on a y-o-y basis across the top seven cities, the report added. With the exception of Mumbai and Bengaluru, where launches grew y-o-y, all other cities saw a dip during H1 2019. Mumbai, Delhi NCR and Bengaluru continued to dominate launches and formed three-fourth of the overall launches during this period.

“Limited number of launches by developers, in a way, is helping the sector to balance the demand supply scenario in the country. This will act as a cushion and help the sector revive. As a result of the reform measures more specifically RERA and GST, we expect more transparency in the sector which in turn will bring back buyers’ confidence. ” said Siva Krishnan, MD – Chennai and Residential services.

The report added that a substantial decline in launches combined with a strong growth in sales in H1 2019 has brought a parity between year-to-sell (YTS) and average construction period across cities. “With Delhi NCR and Kolkata being the exception, the average YTS at 3.4 years across the seven cities compares favourably with the average construction period for a typical residential project across these cities at 3-4 years,” said Samantak Das, Chief Economist and Head of Research & REIS, JLL India.