APPD Market Report Article

Chennai

February 28, 2023

Dr Samantak Das, Executive Director and Head of Research & REIS, India & Sri Lanka

-1.8%

INR 30.4

N/A

High-end apartment sales jump 182% y-o-y

  • Buyer preferences for bigger homes continue to drive the high-end residential sales in the city. The traction volume is visible in the y-o-y sales on account of better pricing deals for tech professionals and high-net-worth individuals, given their need for bigger home configurations to accommodate a hybrid work setup.
  • Sales continue to outstrip new launches, recording a 15% rise q-o-q. The Central submarket contributed 53% of sales and 100% of new launches. The concentration of launches in this submarket is driven by the address and location, which are key to the success of such high-end projects, along with the amenities. Supply is restricted due to limited land availability elsewhere in similar locations.

Launches concentrated in Central

  • The quarter saw a 15% increase in new launches, all of which were concentrated in the Central submarket. The supply dynamics have started shifting with a focus on tech-enabled homes and higher-quality finishes and amenities.
  • Some developers are offering attractive offers for high-end projects. Limited availability of land parcels in the Premium submarket is pushing new launches to Central and Off-Central submarkets and even towards the OMR belt.

Capital values rise 1.7% q-o-q

  • Increasing raw material costs amid supply chain disruptions, inflationary pressures and rising borrowing costs resulted in developers pushing cost increases onto buyers. Capital values rose by 1.7% in the quarter. Capital values may see another round of hikes in the upcoming quarters.
  • Rents continued to remain largely stable for high-end projects. The Southern Suburbs recorded a relatively higher 3.1% increase in capital values and a minor 0.4% escalation in rentals q-o-q, unlike other submarkets where rentals stayed in equilibrium.

Outlook: Sales expected to hold despite moderation in affordability

  • The buoyant home-ownership sentiment is likely to continue to drive sales. Although the rising interest rates may cause some buyers to remain as fence-sitters, developers continue to devise strategies to push buyers to purchase.
  • Capital values may rise in the near to medium term owing to cost-push inflation; however, the hikes will likely be gradual to keep buying momentum intact.

Note: Chennai Residential refers to Chennai's prime residential market.

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