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| 15 per cent drop in real estate |
| After sustained boom, land prices and rentals are on the decline in Chennai
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| INDIA
, 6-July-2007
3:7:15 AM |
| Chennai real estate is now on a downward slide. Market studies have shown that prices of land, apartments and even commercial rentals, particularly that of IT buildings, have come down by about 15 per cent. Builders and promoters confirm this.
Land in Sriperumbudur, which was selling at Rs.7 lakh to 8 lakh per ground, has come down to Rs.5 lakh to 5.5 lakh. Layouts promoted at Vadkapattu, on the outskirts of Chennai, which were selling thick and fast, are stagnating. About 25 per cent of the plots in many layouts, priced at Rs. 650 per sq.ft., remains unsold even after months.
If you are a serious buyer, prices can be negotiated considerably, say brokers. The stagnation is visible. Not that the big builders are finding it easy. One of the upmarket builders near Navalur, on Old Mahabalipuram Road, has about 50 per cent of his apartments unsold. Last year’s euphoria has died down.
Srinivasa Shipping and Property Development Limited Managing Director Prakash Challa estimates about 20 million sq.ft. of IT space will be added to Chennai by 2008 and may put pressure on rentals.
A few promoters confirm off the record that IT companies, which were willing to pay rental of Rs.35 to 40 per sq.ft. until a few months ago, are now offering only Rs.25 to 28 per sq.ft. In August 2006, similar commercial space in T. Nagar was rented out for Rs.70 per sq.ft.
Builders’ Association of India (Southern Centre) chairman A.V. Ramaswamy confirms the downward trend and attributes it to higher land prices, speculation, rising construction costs and higher interest rates.
Experts say the price to earning ratio of Chennai properties is high and has reached unsustainable levels. Such corrections are bound to happen. Some predict that stagnation in property market will lead to further drop in prices. The current market correction, however, has not made housing or land affordable to large sections of people.
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