Chennai Tops Real Estate

By Dhruva Jyoti Chowdhury

Kolkata, India: In the last decade, when the realty all over the country witnessed a major boom, the price rise of land in Chennai did not rise as sharply as they did in the other metros. That reputation, of being a relatively sober market, has taken a U turn now.

The realtors believe that nearly 1,000 medium and large residential housing projects are coming up within a short span and importantly the buoyant interest rates on housing loans have not dampened the market spirit. That’s the reason for which developers are now occupying even the industrial wasteland which extends from the northern to the western part of Chennai.

SSI Limited has acquired one of the oldest industrial landmarks of Chennai, the Buckingham and Carnatic Mills in Perambur, for a real estate project. SSI is building 5,000 apartments on a 70-acre plot. The 1,000 crore rupees project, with landscaped grounds is projected to change the face of the area which was once a working class suburb. Further SSI expects to build 1,000 apartments, priced between Rs.30 lakhs and Rs.40 lakhs, every year for the next five years. Integrated townships along the GST Road, on the Tambaram-Velachery Road, at Valasaravakkam, Sriperumbudur, Vandalur and at Siruseri is also on the planning list of SSI.

Added to this is the government's move to open up Foreign Direct Investment in the sector. Moreover, the Securities and Exchange Board of India (SEBI) has approved guidelines for the Real Estate Mutual Fund, a scheme to facilitate investments in real estate property which will cause prices to spiral out of control.

Growing economy, participation of foreign investors, younger age groups dominating in population and growth of service sectors have made a positive impact on the scenario of Chennai properties. A large number of NRIs have also contributed in the real estate in Chennai. In order to provide a further impetus, both the Centre and the State government has coughed up 200 crore rupees in initiating building a six lane Chennai bypass Phase II, a cloverleaf structure close to the airport that will directly connect the city to different National Highways by 2008.

The average age of prospective clients now has dropped to 28-35 years as compared to about a decade ago when planning to purchase a house was done on the verge of retirement from services. For travelers who combine business and leisure several up-market hotels have been built in recent years. Feeling the heat, international players such as Courtyard Marriott, Radisson, Hilton and Le Royal Meridien have a visible presence in Chennai while another cluster of international hotels are in the queue.

The rates of land being acquired vary between considerable ranges. The land on the lower side consisting of areas in Mogappair East and West is between 1500 to 1700 hundred rupees per sq.ft while the higher side is 3500- 5000 rupees per sq. ft. in areas like Besant Nagar, Nungambakkam and Mylapore.

Feeling the heat Hiranandani group a Mumbai based builder has already invested more than 2000 Crore in the last few months. Besides the ETA group, DLF and several others have already crossed the 400 Crore mark in the city. This elite group includes Chennai-based realty developer Arihant Foundations in joint venture with J P Morgan. Jain Housing and Constructions Limited have more than 3,000 dwelling units covering more than 2 million sq ft. Its current projects involve another 2.5 million sq ft apart from the other national players in realty including Ansal Properties and Infrastructure limited, K. Raheja Group, Bengal Ambuja Housing Development Limited Prestige Group.

The Non-Resident Indians are the most important property buyers in the city. This NRI constitutes the core of the ‘high value’ market in the real estate sector.

This boom is also paving way for the most ultra modern facilities in every nook and corner of the entire city. The developers also seem to be keen on the fact that the owners should get world class amenities and a quality of life that would be virtually impossible in an ‘independent house’. Swimming pools, penthouses, round-the-clock security, landscaped gardens, play areas for children, ATM-banking facility, open-air theatre, shopping arcade, swimming pools and health clubs, ATM-banking facility, open-air theatre, shopping arcade, play areas, swimming pools and health clubs since most of the projects are located on the outskirts, every need of the residents had to be met in order to make it a self-contained township.

Flats are not the only kind of dwelling units coming up in Chennai. For those who have high levels of disposable income, there are builders and promoters who offer "independent" houses, different from the bungalows of yesteryear. For instance, Isha Homes offers middle-class villas with all facilities. The project, located near the nerve-centre of the IT corridor, provides dedicated Internet connections, apart from a common sewage plant, black-topped roads and other facilities on the campus.

Ravichandran, a civil engineer, started his business in 1997 by building in the range of about 25,000-30,000 sq ft per project. In contrast, True Value Homes' Park Villa projects, a "premium project launched two years ago at Perungudi close to the IT corridor is spread over more than 5.25 acres. It consists of 288 dwelling units. Built adhering to the principles of Vaasthu Sastra, the project has virtually created a mini township.

It is now building residential complexes of 1 million sq ft. land prices in the area shot up from Rs.5 lakhs an acre to Rs.50 lakhs an acre since the past project was completed. True Value Homes, like other big property developers, is building an IT Park at MRC Nagar with a capacity of 4 lakh sq ft. The company is also planning a 100-acre satellite township near Tambaram. Experts predict that that the building activity will soon reach Mahabalipuram, about 60 kilometres from Chennai.

Looking at the vast potential of the Chennai market, The Chennai Metropolitan Development Authority (CMDA) plans to implement a `single window' system for processing building plan applications quickly. The idea is to provide a ‘one-stop shop’ for all the approvals for real estate. Even the State government is not lagging in poking its nose to fill up their empty coffers. Recent reports have indicated that Government acquired about 7,000 acres for the establishment of a satellite town outside Chennai estimated over 30,000 acres.

Presently, an apartment in Velchari, Chennai with 28800 sq ft is costing around 10,08,00,000 rupees. These are 2 And 3 Bedrooms with Power Back-up, Lift, Rain Water Harvesting, Three Phase Power Supply, Stilt +Four Floors and Covered Car Parking. A 3 Bedroom deluxe apartment in Harrington Road with 1776 sq ft, is costing around 4500 rupees per sq ft. The apartment consists of large sit out, building with swimming pool, 24 hrs security, covered car park, on the sixth floor (not the top floor).

Thirunmiyur Apartment in Valmiki Nagar is build on 1213 sq ft and is a 2 Bedroom flat on the 1st floor, with a very large bathroom, apartment complex built on 13.8 grounds (33,317sft). Very near to the sea beach is one of the best location of Valmiki Nagar, as per the builders opine. The apartment is being offered for 56 lakh.

Even the commercial spaces are not lagging far behind in this money race. A 900 sq ft basement office space in a good commercial complex in Nelson on Manikam Road is being offered for about 45 lakhs rupees. Near Arumbakkam Spencer's Daily Total 3,795sft land area with 2,876sft Bungalow, 4 Bedroom with servants quarters well designed, in good condition is available for. 1.60 Crores. (Total price for Land and Building).

A 2000 sq ft new apartment for Sale in Alwarpet with 3 bedrooms with balcony in every room, separate dining and drawing room is being offered for about 9000 rupees per sq ft. At present the total area under development is around 32.5 million sq. ft.

Ascendas Industrial Park 1.0 million sq. ft. Mahindra Industrial Park 0.2 million sq. ft. Ambattur 0.2 million sq. ft. City 7.3 million sq. ft. Ramavaram 3.5 million sq. ft. Old Mahabalipuram Road 19.3 million sq. ft.

Areas and Land being developed for Real Estate, at present

After labeling all pre-IPO investment or private placement to foreign institutional investors (FII) in real estate companies as FDI, the government has now decided to bar real estate companies from issuing depository receipts (ADRs or GDRs). The logic of the move is simple. All foreign investment through GDRs and ADRs is to be treated as FDI, which is subject to a three-year lock-in, in the case of real estate companies. A host of restrictions including minimum project size in terms of area and a lock-in period were imposed to keep out speculative foreign capital. They did not take into account the fact that real estate companies could be listed. The FDI norms for the real estate sector framed in 2005 were clearly designed for the simplistic situation of single projects from unlisted companies hence the government is becoming entangled in micro regulation.