Should NRIs confidently invest in Chennai's market?

Top Stories

Should NRIs confidently invest in Chennais market?

Yes, property prices in the city don't double in a year or tumble when markets crash

  • Follow us on
  • google-news
  • whatsapp
  • telegram

Published: Sat 15 Aug 2015, 2:17 PM

Last updated: Sat 15 Aug 2015, 4:20 PM

The Chennai real estate market is a very stable one, where prices rise gradually, and during a slowdown, the fall is also not sharp.
"Chennai is an end-user driven market, not an investor-driven one," says D Pratish, Managing Director, VGN Developers Pvt Ltd, a leading property developer. "About 90 per cent of sales are for end-users, who buy apartments and villas for their own use."
According to Pratish, prices in Chennai don't double in a year, nor do they tumble when the markets crash. "When prices start declining, an investor has the time to sell, unlike in other cities," he remarks.
Comparing Chennai with Bengaluru, Pratish notes that the city is not dependent solely on the information technology sector for demand. "Besides IT, Chennai has a vibrant automobile and auto-component sector, as well as manufacturing. It also has an excellent port, and buoyant telecom and textiles industries. If one sector does not do well, there are others that sustain the economy," he notes.
After about two years of stagnancy, prices have started increasing in the last quarter, says Pratish. "The sentiment has turned positive and I expect the sector to expand over the next few months." He divides the real estate segment in Chennai into four categories - affordable (anything below Rs3.5 million), mid-segment (between Rs3.5 million and Rs5 million), premium (Rs5 million to Rs15 million) and luxury (above Rs15 million).
In the mid-segment, supplies are more than demand. "Over the last three years, there has been an over-supply of mid-priced homes," says Pratish.
But demand for luxury housing in Chennai is more than the supplies, primarily because of a shortage of land in prime localities, he explains. "Land prices in the city, especially areas such as Boat Club, Poes Garden and Nungambakkam are always high," says Pratish. "It is difficult to get a one-acre plot of land in the heart of Chennai. Hence, the supply is limited, though demand continues to grow."
In fact, demand from NRIs for luxury housing is huge. VGN Developers recently launched VGN Presidency, a 16-storey tower on Nungambakkam road, and the response from NRIs has been phenomenal, he notes. "We have sold 20 apartments, out of 72. And 15 of these have been bought by NRIs from Singapore, Malaysia, Dubai and the US," he says. The apartments, with a minimum size of about 3,200 square feet are priced at Rs78 million and above.
He attributes the growing NRI interest in the Chennai housing market to the sharp depreciation of the rupee vis-à-vis the US and Singapore dollars and the UAE dirham.
Pratish says that luxury apartments in Chennai are spacious as compared to those in other cities such as Mumbai. "When you buy a luxury apartment in the heart of Mumbai, the common area would be about 60 per cent. This means that in a 1,000 square feet apartment, the liveable space would be just 400 square feet in a luxury complex," he says.
But in Chennai, the liveable space would be 700 square feet and the common area 300 square feet. At VGN Presidency, the ratio of liveable to common area is 72:28, he adds.
VGN bought the 1.5-acre plot of land in Nungambakkam for about Rs1.95 billion in 2013. It also bought another huge plot at Guindy for about Rs4 billion, where it is developing a 1,500-apartment complex in the premium segment.
Pratish says that it is difficult for builders to enter the affordable segment in the absence of subsidised or free land being provided by the government. "Without state support, it is difficult to get into affordable housing," he says.
When asked about the state of infrastructure in Chennai, Pratish is all praise for the city. The first phase of the metro has just taken off. The city also has an enviable suburban railway network connecting distant suburbs. The bus transportation system in Chennai is also efficient. Also, Chennai does not suffer from the crippling traffic snarls that are evident in cities such as Bengaluru.
Importantly, the city is one of the safest cities (especially for women) in India. It is also becoming cosmopolitan and enjoys a vibrant social life. "Chennai now is a happening city," ?he adds. Pratish's great-grandfather established the VGN Group in 1942. His father got into the real estate business in 1985 and launched plotted developments.
Pratish took it to the next phase in 2006, when the company began developing apartments and villas. "We have developed more than 5,000 homes," he says.


More news from