CHENNAI: The city’s beleaguered real estate market had one of the worst downturns in recent history in 2013 and the first half of 2014. But reports now indicate that the market is finally turning around.
Traditionally considered an end-user driven market, Chennai has long been considered safe for long-term investments because of high stability and low volatility of prices. But even an 85-90 per cent composition of end users couldn’t prevent the fall in 2013.
Sales and launches fell to appalling lows, with a Knight and Frank report pegging the fall in housing property sales at more than 33 per cent, while new launches fell by more than 35 per cent. According to developers and industry experts, inventory also shot up to more than 25 months for certain developers. “A manageable inventory overhang would be somewhere around 12-15 months. But during last year, the inventory increased to as much as 18 months for us,” said R Kumar, managing director of Navin’s, a major developer in the Chennai region. And the first half of 2014 fared little better.
But recently released reports by CRISIL and other organisations indicate that the bottomed out market may finally be on the path of recovery. According to a CRISIL report, released to Milestone Capital, capital values in Chennai’s real estate sector are estimated to grow at a compounded growth rate of 4 per cent, from the beginning of 2015 until 2018, with the Sriperumbudur and OMR micromarkets leading the recovery. The estimated growth in value in the two micromarkets has been pegged at 7 pc and 5 pc, respectively, in the next three years.
The second half of 2014 is also likely to see launches and absorption increase by 31 per cent and 14 per cent respectively. “Inventory is already coming down from the highs of 2013-14 and while still not at optimum levels, the signs are hopeful. Consumer sentiment has also turned more positive,” said an industry source.
While the city’s expected growth is by no means as high as other metros and the National Capital Region, the expected recovery has put it back in the sights of investors.
Milestone Capital Advisors, a real estate investment firm, said that the Chennai market would draw almost 30 pc of the money raised from the firm’s recently launched fund. “Our outlook for Chennai is quite positive and we plan on investing close to 30% of the funds raised through this new fund,” said Ruby Arya, director and vice chairman of Milestone.