Chennai realty market may see price increase in near future: experts

New launches have seen a drop of 62% in 2015, piled up inventory likely to be consumed

The real estate market in Chennai is expected to see a drop in new launches in the near future, followed by a price hike, as piled up inventory would be consumed by the time and there would be more demand than supply, say industry experts.

New launches have dropped by 62 per cent in 2015, over the previous year, indicating that developers have been cautious about investing in new projects and have kept a check on piling inventory, said the latest Chennai residential real estate market commentary by real estate consultant firm JLL India.

Absorption rate increased to 31.3 per cent in 2015 from about 26.6 per cent in 2014, and while there was a decrease in launches this year, the number of sale deeds showed a rise. This resulted in clearing a lot of unsold  inventory that had piled up, facilitating an upward correction in the market, the report added.

According to JLL data, new units launched in 2015 stood at 8,601, while 20,484 units were sold, which was one per cent lower than the previous year sales. Unsold units in 2015 were 45,017, down 21 per cent over the previous year.

"The new files submitted for approval with the regulatory authority have come down almost 40 per cent during the year. With the demand absorbing the available inventory and new projects expected to take some time to hit the market after getting the regulatory approvals, we are seeing a price appreciation in real estate," said T Chitty Babu, chairman & CEO of Akshaya Homes and chairman, best practices, Credai National. He was commenting on a panel discussion organised by industry organisation Confederation of Real Estate Developers' Association of India (Credai), Tamil Nadu, in collaboration with JLL, on the Chennai market.

Concurring with the view, Sandeep Mehta, Jain Housing & Construction Ltd said that the industry is currently offering various discounts, but they would not last for long. For the customers looking to buy a house, this could be the right time considering that prices are set to increase.

The market started seeing a revival in the second half of January, said R Kumar, deputy general manager, real estate and housing business unit, State Bank of India. He added that after the collapse of a residential building under construction in Maulivakkam last year, customers have started looking for better, albeit more expensive properties, he added.

The Chennai real estate market started reviving after the December floods that affected the industry for a short period, he added. While there were negative sentiments following the floods initially, people have started moving forward now, he said.

Sanjay Chugh, national head-mandated sales & business head-Chennai, residential services said that the Chennai real estate market has seen more customer enquiries and walk-ins during the second half of January and February. This is expected to convert into actual business, which would be a positive development in the market, he added. He said that owing to the demand supply situation and its movement, real estate prices are expected to see an increase.

However, the overall cost of owning real estate has to come down, including the cost related to the land and receiving the necessary regulatory approvals for it to see better growth, said Ajit Kumar Chordia, president of Credai Chennai.