Chennai’s residential market sees modest recovery

Chennai’s residential market sees modest recovery
20/07/2017 , by , in News/Views

After a considerable lapse of time, Chennai has reported a 14 per cent growth in sales during H1 2017. The city has absorbed 6,035 residential units and launched 8,850 units in H1 this year.

The 5 per cent y-o-y growth could herald a new era towards sustained revival in demand. Unsold inventories have plummeted nearly 30 per cent over the last two years to 28,110 units.

According to a survey by Knight Frank India, a significant number of launches during H1 this year was in the affordable segment under Rs 50 lakh category.

The share of such projects has jumped from 39 per cent in H1 2016 to 69 per cent in H1 2017 while the average ticket sizes under Rs 75 lakh has grown from 52 per cent to 89 per cent during the same period.

Location-wise South and West Chennai together accounted for a massive 96 per cent of the residential projects coming online during H1 2017.

Whereas OMR and GST far outstrip in terms of preference for buyers as they offer the most appropriate mix of relatively affordable housing, connectivity to work places and a reasonably well developed social infrastructure.

The residential market currently has a QTS (quarters to sell unsold inventory) of 6.5, with an average age of inventory of 13.8 quarters.

The south and west micro markets hold the highest amount of unsold inventory and it will take less than two years to get absorbed at the current rate.

The north market holds over two years’ inventory but the ongoing drastic reduction in supply will maintain an equilibrium in the short term and see an improvement if demand continues to sustain and grow from current levels.

Residential price growth has been weakening and H1 2017 prices were in line with this trend, growing by a modest 1 per cent y-o-y.

On the office market front, the city has absorbed 1.9 million sq ft during H1 2017 and likely to touch 4 million sq ft by the end of the year.

In a related development, a number of private equity funds are evincing keen interest to invest in commercial space and midway construction projects in the residential segment.

The impact of demonetisation and the slowdown in growth have put a number of medium size approved residential projects on hold across micro markets due to liquidity crunch including land development projects.

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