City’s realty market more resilient than other metros

In his overview of the metro’s realty scenario, Ramesh Nair, COO, JLL India, said compared to other locations in the country, where the average delay on projects was two years, the city suffered only six months in the context of delay. This is a positive thing though it is not something to cheer about, he went on to add. Despite floods and other challenges, Chennai had bounced back. Noting that the prices had still not come down, Ramesh said while the country-wide sales had seen a 25 per cent dip, the sales in this southern metro had only taken a hit of 15 per cent. 

Dwelling on some of the notable trends in the realty sector, he said it is going through consolidation with a lot of distress deals coming to the fore. The IRR or the internal rate of return expectations have become more “reasonable” and the industrial segment is emerging as a $50 billion asset clause with the GST also helping this possibility. Also, collaborations between developers were happening thick and fast, given that at least two dozen such examples were available where a full fledged developer is fine with the idea of selling land. Platform level deals too were happening and interestingly, in the country’s real estate sector, with American Funds like Blackstone (investing $33 million) had dislodged domestic giants such as DLF and Raheja, Ramesh said. 

Though the residential segment had been dull during the last three years, the annual increase in prices hovered around 2 per cent and prices had not gone down on an average over the last four years. However, developers had stopped launching projects. On the back of sales dropping from 26,000 to 18,000 units, there was an unsold inventory of 43,000 units, which was nothing but “13 quarters of demand. These would typically take three years to get completed,” he sought to point out. 

Absorption of office space had risen over the last three years from 4 mn sq ft to 6 million sq ft. But compared to its neighbour Bengaluru, which had 13 million sq ft  absorption due to captive IT presence, he said more focus had to be on job creation. 

It was time for TN to do more and like the Telangana government, where that state’s IT minister visited Apple headquarters to woo by marketing itself as the “best state”, TN too had to attract top brands such as Google, FB or Apple to spur the realty sector. 

In the past, it was TN’s ability to bring in investors such as Ford and Hyundai and create mega IT parks such as Tidel, that had made the manufacturing growth possible. A study of Navi Mumbai revealed that absorption of 25 lakh sq ft office space had resulted in the residential demand going up by 25,000 units. Likewise, when the space absorption fell to 10 lakh sq ft, the residential demand also fell. 

Predicting the trend of top four Chinese developers looking at India, with largesized teams visiting to understand the market, he said, apart from Chinese deals that are on the anvil, five funds from Canada too were also evaluating equity and development kind of deals. These were more in the mid-market residential segment and not in the luxury space, he said, exhorting stakeholders to be ready for such investors vying for a “hands-on” partnership controlling role rather than remaining passive. So, co-branded projects will be a reality, he added. 

Others who spoke included Vikram Kapur, Principal Secretary Industries, Dr Rajendra Kumar from ELCOT; Dharmendra Pratap Yadav, Housing and Urban Development Secretary; TK Ramachandran, IT Secretary; B Santhanam, MD, Saint Gobain; BC Datta, Finance Controller, Hyundai; Mathew Joseph, Executive Member, HDFC; K Purushothaman, Nasscom Regional Head and Suresh Krishn, President, Credai Chennai.