Mint Explainer: What’s keeping Chennai’s affordable housing market momentum going?

The Knight Frank report states that since H2 2020, the Chennai residential market has been steadily improving, with sales momentum increasing by 21% to 6,951 units in H1 2022.

Mint spoke to experts from the housing industry to understand what makes Chennai unique to be on the list and what the future of affordable housing looks like.

“Chennai’s property market has been performing consistently well over the years. The city especially thrives in manufacturing the automotive industry and serves as a hub for IT and logistics, with well-spaced and improved infrastructure offering tens of thousands of jobs, thereby It becomes a preferred option,” said Rajesh Lund, joint secretary, Confederation of Real Estate Developers’ Association of India (CREDAI) South.

Home builders also point out that the city’s mixed economy and reasonable cost of living are the primary reasons people move here compared to other metropolises in India.

Indian cities are witnessing a trend towards premiumization in almost every sector and the housing market is no exception. Industry experts say Chennai has a different view on this.

“Affordable homes in Chennai usually come with most of the amenities offered in premium properties such as more open space, swimming pool and more. Their price is usually between from 60 lakhs 1.2 Cr. On the other hand the upmarket price is between from 1.2 crore 5 crore hyper luxury properties have also started gaining momentum,” Rajesh Lund also said.

Kumar, Founder and CMD, Naveen Housing & Properties Ltd, one of the top builders in Chennai, said that the housing sector in Chennai is primarily an end user market.

“Buyers look for vibrancy and have a variety of requirements. Builders try to fit features at par with premium markets and this is possible because of the right pricing. There are at least no apartments in the city 4,000/sq ft and it runs up to 30,000/sq ft and in fact when it comes to apartments the average property price is higher in Chennai than in Bengaluru,” says Kumar.

The industry is also deeply concerned over inflation and the RBI’s hike in the repo rate, which has made home loans costlier.

The central bank has increased the benchmark repo rate by 190 basis points since May to tackle inflation and is expected to increase rates further by March. Inflation is projected to fall just under the RBI’s tolerance band of 4-6% during the first quarter of the next fiscal.

Kumar, however, maintained an optimistic tone while talking about inflation and its impact on housing businesses.

“It has no impact in the short term and I am confident that inflation will return to normal in the next six months,” he said.

“Builders are also cautious and making measured decisions with an understanding of the external environment by not committing themselves to too many projects to keep demand and supply balanced,” he says.

Kumar actually calls it prime time for those, especially NRIs who want to invest in appreciating properties.

The Knight Frank report interestingly states that sales were concentrated in the South and West micro-markets and accounted for 93% of total sales during H1 2022. So Mint spoke to builders who work on affordable housing projects specifically in these emerging markets.

These builders too had an optimistic outlook towards the future of affordable housing, though they find the market a bit sluggish in the last three months due to uncertainty in the job market and rise in home loan EMIs.

“Affordable housing is expected to flourish in the coming years, especially in emerging markets as they largely cater to first-time buyers. Properties built in these areas are sold here from 40 lakhs 60 lakhs and these are compact 2 BHK homes with basic amenities,” said Saravanan, owner of Venus Homez.

Talking about the sales and marketing strategies in the fast growing digital world, Saravanan said that a solid online presence of your business has become imperative especially after the pandemic. They rejected the idea of ​​moderators as it was not working for them personally, on the contrary they got access and inquiries online and out of home and through other forms of print advertising.

Business sentiment in the affordable housing segment remains strong and a favorable environment for homebuyers is seen as the pandemic looms large, with the risk of disruption looming. With inflation expected to normalize from both builders and buyers in the coming months, affordable housing in Chennai is expected to pick up further.