Chennai Real Estate 2010 - Latest trends

Chennai, a city in Tamil Nadu on the Bay of Bengal; formerly known as Madras is among the most beautiful of cities in India with its inspiring intellectual inheritance and shrine architecture. Situated in a region with many rivers and brooks and with a healthy population of 6.9 million, Chennai is distantly situated from the national capital Delhi and has been an important and one of the four metropolitan cities since the historical times. Chennai is the fifth most populous city in India and fourth most populous metropolitan. With the materialisation of Multi National Companies in India, Chennai’s economy today has broad base in car, computer, technology, hardware manufacturing, and healthcare industries. The city is in fact India’s second largest exporter of software and has caused an increasing first choice of the city as a big business centre by most important international companies, who have invested immensely in the financial system. The Chennai property market has seen an escalation of almost 200 percent in the last few years but with the global slump in the real estate industry, Chennai real estate has slowed down. The residential real estate prices in Chennai have grown by leaps and bounds making it difficult for buyers to purchase a home in the city. People are awaiting the market to stabilise further despite recent corrections. This has caused a 90% drop in demand for residential projects since the start of the year. The commercial sector is not being spared either having seen a 15% drop according to media reports. The IT MNC’s largely drive the demand for Chennai properties but due to the current recession, many companies have postponed their expansion plans. Experts however predict that the market will bounce back. Besides global inflation, the home loan rates have been steadily increasing, coupled by increasing input costs which have resulted in slump property transactions in Chennai. Quite notably, Old Mahabalipuram Road, the most blistering real estate destination in Chennai is also experiencing a downfall blaming the effect on lack of infrastructure facilities and real estate agents admit that there have been only a few transactions in the areas for quite some time. A few of the eminent developers in India have shown their interest in increasing real estate in Chennai while property builders at the moment are constructing properties of the highest standards to pick up on the current slump.

DLF to open Luxury malls in Hyderabad and Chennai

Real estate developer DLF Ltd that currently operates luxury mall -- DLF Emporio -- in the Capital is considering to start similar projects in other big cities, including Hyderabad and Chennai, that are seeing traction for high-end brands. "We are looking to open more luxury malls in cities like Hyderabad and Chennai," DLF Malls Business Head Savitri Devi Singh said. The company is currently in talks with the existing tenants at its DLF Emporio for the same. "There are some 10-12 anchor brands we are in discussions with to bring up similar models in other cities," she said. According to Singh, who did not disclose the investment planned by the company in future projects, developing malls for housing luxury brands is an attractive proposition. "DLF Emporio has already broken even and is doing very well in terms of revenue generation. It is a very viable business," Singh said, although she declined to divulge the amount, developer invested on the mall. According to her, the mall is currently operating at a conversion rate of about 70 per cent. Some of the brands in DLF Emporio include Giorgio Armani, Salvatore Ferragamo, Louis Vuitton, Cartier, Fendi, Dior, Just Cavali, Aigner, Tods, Tiffany’s, Burberry and Hugo Boss, along with some leading Indian designers. "Even Chandigarh has good potential for selling luxury goods, but we are not sure whether it would be right to open another mall there due to its proximity to Delhi," she added. Cities like Bangalore and Mumbai already have luxury malls such as the UB City and Galleria, respectively and entering there is a much lesser attractive option. If experts are to be believed, there is a dearth appropriate retail space in India that is keeping many luxury brands away from the country. "There is a serious need to have more retail spaces for luxury brands to expand or enter India," AT Kearney Principal Neelesh Hundekari. According to a CII-A T Kearney report, India's luxury market, which is small compared to global standards, is likely to grow three times and touch $14.7 billion by 2015. In 2009, the luxury industry, including products, services and assets, was estimated at $4.76 billion.

Tata Housing plans new residential project in Chennai

Tata Housing, the real estate developer for all consumer segments, has forayed into the Chennai residential market. It plans to invest nearly Rs. 2,000 crores in current fiscal. It proposes to develop nearly three to four million sq. ft in the few years. Addressing a press conference here on Tuesday, Brotin Banerjee, Managing Director and Chief Executive Officer, Tata Housing Development Company Limited, said the proposed investment includes Crescent Lake, an integrated township project, spread over in 25 acre of land at Oragadam, an industrial hub of Tamil Nadu. The company proposed to develop 2,200 residential units in the next four years. The price range of the flats would be around Rs 14 lakh to 35 lakh. The project cost was estimated to be Rs. 650 to700 crore. Mr. Banerjee said the phase I, which would have 960 apartments with six high rise towers offering 1BHK, 2 and 3 BHK apartments with a minimum size of 570 sq ft and the maximum of 1,406 sq. ft. The cost of the apartments would be Rs. 2,500 sq. ft. The second phase would have row houses and 3 and 4 BHKs. The company was planning to tie up with the local land owners and develop projects in Chennai. It was planning to take up two more projects - large value home townships on 40 to 50 acre, priced around Rs 6.5 lakh to Rs 35 lakh and a premium project in Chennai city. Apart from Chennai, the company was planning to develop a residential project at Hyderabad on 30 acres of land. The project would be developed along with a joint venture partner, who would bring land for the project. Mr. Banerjee said the company was talks with various State Governments to promote affordable housing projects. It had initiated talks with the government to promote affordable housing projects through public private partnership (PPP) model. Already the company had entered into a MoU with the Assam Government to create commercial developments in the state. The first MoU was signed between THDCL and The Department of Industries and Commerce of Assam for creation of commercial space, including business parks and IT buildings in the state. The second MoU was signed with the Guwahati Metropolitan Development Authority (GMDA) for developing a township and other infrastructure projects under the PPP model within the State. He said the company was in decision with other State Governments to promote affordable housing projects.

Mahindra Lifespaces Developers Ltd setting up Business parks in Chennai

Mahindra Lifespaces Developers Ltd is in the process of acquiring around 4,000 acres in Chennai and Pune, where it intends to set up two more business parks, a top official said late on Monday. The company is acquiring around 1,000 acres of land in Chennai and around 3,000 acres in Pune, its Managing Director and Chief Executive, Anita Arjundas, told Reuters in an interview. Arjundas declined to comment on the cost for land acquisition. The firm, part of the diversified Mahindra Group, specialises in both the residential housing and commercial development segments. A business park is a township with office spaces. It already has two business parks of about 4,000 acres under its commercial segment. The parks are operated under the brand Mahindra World City’, at Chennai and Jaipur. “Land procurement is underway, so once we are done with a significant part of it, we will start development,” she said. She did not provide a timeframe for completion of the business parks. Mahindra Lifespace is also looking to tap the recovering residential housing market by launching new projects in two tier-1 cities, she said, but did not elaborate. It focuses on the mid market and premium residential customer segments. It already operates housing projects in Mumbai, National Capital Region (spanning New Delhi and adjoining areas), Pune and Chennai. Mahindra Lifespace has about 8 million square feet of space for ongoing housing projects and new launches. It has already completed construction in 6 million square feet. She said real estate prices in Mumbai, India’s financial capital, has recovered faster, while correction in other cities were much slower. India’s real estate industry, like the sector globally, was hard hit by the 2008 credit crisis after years of booming demand. Property prices doubled in the two years to 2007, fuelled by interest from foreign investors. But the sharp rise was followed by interest rate rises to calm inflation and the global financial turmoil, pulling down sales by more than half. “Our understanding is that the market is back to the Jan 2008 levels, back to the peak level. General demand in Mumbai seems to be very good, while NCR seems to be a bit of a mixed bag,” she said.

FSI violation by 35 buildings at T. Nagar

A recent survey of 35 multistoried buildings on Usman Road and Ranganthan Street, T.Nagar, conducted by the Chennai Metropolitan Development Authority (CMDA), shows that all the buildings have violated the FSI (Floor Space Index) and car parking norms. The width of Ranganathan Street is about 10 metres and multistoried buildings are not permitted on this road. However, 14 of them have been built in the last few years and are functioning. A close scrutiny of the CMDA survey shows that the percentage of violation far exceeds 600 in certain cases. The Yograthirnam building, door numbers 128 and 129 on Usman Road, has a FSI of 8.99, while what is permitted is only 1.5. FSI is the total built-up area divided by the plot extent. The building must have a mandatory parking space for 266 cars within its site. But space for parking only one car is provided. The new GRT building on 50 North Usman Road got sanction for only five floors, including the basement, but eventually 11 floors, including the basement, were built, violating FSI and car parking norms. In the case of the Sekar building, old numbers 84 and 85 Usman Road, the total built-up area is 7,089 sq.m with an FSI of 8.42. However, what is permitted is only 1,263.51 sq.m or 1.5 FSI. The Jayachandran building, door number 34/1 Ranganathan Street, Nalli Trust building, new number 100, Usman Road, has also violated FSI and car parking norms. Most of the 35 multistoried buildings have not provided the mandatory side open space. A CMDA source told The Hindu that most of the owners of these buildings when they apply submit a drawing that complies with all rules. They get planning and building permission. But when they start construction, they deviate from the approved plan. The function of the enforcement cell of CMDA is to inspect and stop such unauthorised construction. However, the CMDA, in a note submitted on its enforcement cell, has stated that it is understaffed and is not in a position to monitor building activities effectively. There is an overlap of enforcement functions between the Chennai Corporation and the CMDA. The CMDA has recommended that the Corporation entirely take over enforcement responsibility. There are also instances of negligence and corruption. Recently, two Corporation officials were suspended for failing to take action against unauthorised construction in the T. Nagar zone. As in the case of Yogarathirnam building on Usman Road, stop work orders were issued (EC2/4749/05 dated 30.7.05) and a fine of Rs.11,82,900 was imposed. However, in many cases, even after receiving the stop work notice, construction continued. A few violators received demolition notices. Thirty days’ time is given to the owners to restore the buildings to the approved plan. Invariably, many ignore the notice or apply for permission to retain the building. CMDA officials say the Town and Country Planning Act prevents enforcement action on buildings whose applications are under consideration or appeal. A few have taken the legal route and obtained a stay against the demolition orders. In the meanwhile, construction continues and the building is completed. While these buildings may get regularised through a government order, there is no system in place to ensure that such violations will not occur in future.

How can real estate be real?

Housing sector initiatives in India - the beginnings. Housing as a priority was pushed to the front line in 1954 when the National Building Organisation (NBO) was set up by the Government of India for laying down plans and policies to promote housing to the homeless. The private sector got into the act in a big way when construction people set up real estate outfits eyeing the vast scope in the field. While the Government concentrated in providing budgetary plans through subsidised schemes, the private promoters and builders set their mind on providing posh apartments and luxurious living to the upper class. Market promotion Sales campaigns and marketing strategies came to the forefront, supported by glossy advertisements attracting the buyers. Banks and financing institutions stood in bee-line with schemes for providing loans on attractive and ‘liberalised’ terms. Some typical advertisements read thus: “Builders’ ads; Paradise regained in your new home; Luxurious living in nature’s lap; Buy an apartment and enjoy the facilities of a villa/resort; The address of royalty; The bank ads said, ‘Smart home loans,’ ‘No down payment,’ ‘Lowest interest,’ ‘No hidden charges,’ ‘Tailor-made facilities,’ ‘EMI as low as Rs. 499,’ etc. There have been hardly any who questioned the veracity of these ads. Tighten process As in many other cases, the administrators and law makers did not find any role for them in the field till things went wrong in the form of customer complaints, legal tangles, non-performing assets in banks, irregular constructions and so on. Even then, rarely there has been any direct confrontation with the perpetrators of the problems. Only the Reserve Bank came on the scene, through the banking system, to tighten the loan dispensation process. The proposed regulatory legislation too is yet to become a reality. Who is to ensure fair practices? There are many organisations of players in the real estate market, like the Ownership Apartment Promoters’ Associations at different State levels, Confederation Of Real Estate Developers’ Association Of India and the like. Code of ethics Some States have even enacted legislations, such as, Karnataka Ownership Of Flats (Regulation Of Promotion, Construction, Sale, Management and Transfer ) Act, 1972, and the Haryana Urban Development Act. It is reported that the Associations of Promoters/Builders have laid down code of ethics. State legislations have penal provisions against non-fulfilment of the provisions and rules laid down. In some centres, there are organisations of owners of sites and apartments working for protecting their members’ interests. If only all the Players and Regulators ensure implementation of rules and regulations and follow ethical practices, the real estate market can be a fair market. Further, the Government should not see the sector as a revenue spinner by raising the guidance value, cost of stamp duty and registration from time to time, escalating the cost, leading to unfair practices. Play fair If “real estate has to be real” each one of the players should play fair. The buyer should also value his money- even borrowed money. He has to avoid falling prey to the glossy ads and false promises, but does his home work well, before entering the field.

Interest rate reduction doesnt really excite consumers

A reduction in the interest rate announced recently by a few housing finance companies and banks and the possibility of others also following suit, with the festival season round the corner, could not be better timed. The slashing of the rates comes at a time when the real estate is going through a sluggish patch in the backdrop of the sharply rising land prices making middle class households increasingly feel that there is little for them to purchase. While representatives of the realty sector are happy about the reduction, as they feel that the move would revive customers’ interest, existing customers of most of the HFCs and banks who opted for floating interest rates feel that they are being discriminated against. This is because the reduction in the rates is only for new customers, in other words those who will seeking loans afresh. What this means to the existing customers is little respite from the rather sharp increase in the rates on their home loans in the last two to three years. Their demand for also being extended the benefit of the recent reduction is not without reason as many of them have seen the interest rates spiral from 8 to 10 per cent or even more. It meant either an increase in the EMI (Equated Monthly Installment) amount or the repayment tenure. Upward movement Sources in HFCs said most of the institutions were in the practice of revising the floating rate every quarter though for some quarters the movement has been only upwardly. While pointing out that the reduction could well mean the beginning of the end of the alarming phase with regard to the spiralling rates, an official of LIC Housing Finance Limited said the reduction is translating into more customers. As regards the decision of the institutions to apply the reduction to only new customers, the sources reasoned that it was not easy for the companies and the banks to do since they had borrowed their funds at different rates and at frequent intervals. It would happen only when the cost of funds for the institutions come down. In addition, they also inform that whenever reduction is announced it only means that the banks are only offering a discount on the floating reference rate (FRR) and the FRR itself is not cut. Hailing the new interest rates, N.Sairam of G.R.Natarajan and Co said the existing customers should also be extended the benefit. The new rates, he said, was one of the few heartening aspects for the builders in the backdrop of the rising cost of raw materials and escalating land prices. Attractive The need of the hour, according to Mr. Sairam, is an interest rate regime which is attractive to the middle class and affordable housing. The focus should be on making more people own dwelling units rather than catering to the high end of the society. M.K.Sundaram, managing director, Chozha Foundation, said the rates for new customers were not surprising given that the rising interest rates for the banks also meant many households putting on hold their decision to purchase. He said some of the institutions, particularly those based elsewhere in the country, were offering special rates to the customers of certain builders and developers. Mr. Sundaram said one of the scheduled banks recently approached him promising that it would offer home loans at competitive rates to his customers. This was a welcome initiative, he said, even while highlighting the need for the HFCs to give some respite to the existing customers on floating rate as well.

Home loan fair inaugurated

‘Find and fund your house’ is the motto of State Bank of Mysore’s Home Loan Utsav that opened here on Monday. A 50 per cent concession in processing fee is offered. Some 10 builders are showcasing their housing projects at the venue. If a visitor decides to choose one and seeks a housing loan for it, the bank would provide its home loan that takes care of furnishing, and registration costs, in addition to the cost of the house. The home loan can also be insured under ‘SBI Life’ for a one-time premium that is part of the home loan. Loans are available with a floating rate of 11 per cent interest. Actor Kumari Sachu inaugurated the utsav . The Bank plans to have two more home loan fairs that would be area-specific for the IT Corridor localities and in Anna Nagar. It is extending a concessional rate of interest and reduced processing charges to its customers for home loans till November 30, to mark the festival season. The fair is on till Wednesday at C.P. Ramaswamy Art Centre on Eldams Road.