OVERVIEW

Chennai real estate market has been stable with moderate price

appreciation of 8 – 10% in 2012. With inprogress infrastructure projects

taking shape, the demand and capital values are expected to rise across

all sectors. Focus on improvement of public modes of transport has been

one of the major highlights in Chennai. This is evident from the expansion

of the existing highways, work on Chennai Metro and the Outer Ring

Road.

Approval of three new bridges connecting ECR and OMR at Neelankarai,

Palavakkam and Kottivakkam is expected to impact the capital values.

Going forward growth in Chennai would not solely be determined by the

IT/ITES sector, but also the transport corridors of the above mentioned

infrastructure projects. Chennai market is looking forward to the MRTS

and BRTS projects to give the city a new face in 2014-15.

2012 has seen the city shift investor focus from the usual OMR, ECR to

the WEST and NORTH of Chennai. The operationalization of the TIDCO &

Ascendas SEZ at Tiruvallur and the operationalization of the new airport at

Sriperumpudur in 2015 is driving interest in the North & West Chennai

regions.

STOCK AND ABSORBTION

Global uncertainties and IT/ITES sector going slow with their expansion

plans impacted the real estate scenario in Chennai with high vacancy rate.

Though the focus on residential sector from developers end was high, and

Chennai market saw remarkably high number of new launches in 2012.

Sales were moderate in comparison to the new residential supply added to

the market. In 2013 Chennai residential market is likely to see few

launches compared to 2012 but improvement in sales with an overhang of

18-22 months.

Going forward growth

in Chennai would not

solely be determined

by the IT/ITES sector,

but also the transport

corridors of inprogress

projects

Chennai Residential Market Zone Wise Distribution of Stock

Source: IndiaProperty

Chennai Under-Construction vs. Ready to Occupy Stock

Source: IndiaProperty

South Chennai Residential Market Absorption - Stock and Availability

Source: IndiaProperty

1% 15%

68%

16%

CENTRAL NORTH SOUTH WEST

0

5000

10000

15000

20000

CENTRAL NORTH SOUTH WEST

Ready 2 Occupy Under Construction

0%

10%

20%

30%

40%

50%

60%

70%

0

2000

4000

6000

8000

10000

12000

Less than 30 Lacs

30 - 50 Lacs 50 - 75 Lacs 75 - 1 Cr Above 1 Cr

No. of Total Units % of Available Units

What we see is in

South Chennai,

across all budget

ranges more than

50% units are

available indicating

piled inventory

If the current

sluggish growth of

IT/ITeS sector

continues South

Chennai is

expected to face an

oversupply

situation. Another

area of concern is,

lack of basic

infrastructure

The above graphs highlight the current residential market scenario of Chennai.

With maximum new launches and construction happening around OMR and

GST Road belt, South Chennai is seeing maximum growth. Concentrating on

South Chennai, for all the budget ranges more than 50% units are available

indicating piled inventory.

If the current sluggish growth of IT/ITeS sector continues the area would face

an oversupply situation. Moreover, lack of basic infrastructure (roads, water,

and sewage system) would heighten it further.

CAPITAL VALUES

Residential Property Rates for Mid Segment Properties in Major Micro Markets

in Chennai:

MICRO MARKET CAPITAL VALUE (INR psft)

Porur 4500 - 5000

Guduvanchery 3000 - 3200

Vandalur 3000 - 3300

Oragadam 2800 - 3500

Navalur 4500 - 5000

Medavakkam 4300 - 4500

Akkarai (ECR) INR 2 – 2.5 Cr (Only Villa Projects)

On comparing the prevailing market rates in Chennai residential market to the

property rates consumers are ready to pay; micro markets Medavakkam,

Guduvanchery, Oragadam and Vandalur have comparable pricing.

The increase in pricing of Porur and Navalur residential market over past four

quarters has led to a demand and supply mismatch. What is typically seen is

when prices increase in a certain market, it forces the mid income buyer

segment to shift focus to lower priced micro markets.

In 2013 we expect these markets to have stable pricing.

Price Preference of Consumers for Various Micro Markets in Chennai – Overall Pricewise

Source: IndiaProperty

Chennai Popular Micro Markets Pricing Preference by Consumers – On Basis of Rate psft

Source: IndiaProperty

0%

20%

40%

60%

80%

100%

120%

Less than 30 30 - 50 Lacs 50 - 75 Lacs 75 - 1 Cr Above 1 Cr

0%

20%

40%

60%

80%

100%

120%

Less than 2000 psft 2000 - 3000 psft 3000 - 4000 psft

4000 - 5000 psft Above 5000 psft

Over the past four

quarters Porur and

Navalur have been

hot markets and

have seen an

increase in pricing

DEMAND FOR TOP LOCATIONS IN CHENNAI

VELACHERY

SHOLINGANALLUR

MEDAVAKKKAM

URAPAKKAM

TAMBARAM

PORUR

AMBATTUR

Chennai Demand for Popular Micro Markets over Last Three Quarters

Source: IndiaProperty

MARKET TRENDS

The suburban micro markets of Porur, Poonamallee, Pallavaram, Chrompet and

Tambaram which witnessed fresh launches in 2012 are expected to appreciate by

7 – 10 % in 2013. Other micro markets to look for are Ambattur, Avadi, Kolathur,

Madipakkam, Medavakkam, Pallikaranai, Thiruporur, Urapakkam, Velachery.

Q 3 (Oct – Dec 2012) - Chennai Micro Market Ranking for Consumer Demand

Source: IndiaProperty

0% 1% 2% 3% 4% 5% 6%

Porur

Tambaram

Medavakkam

Ambattur

Urapakkam

Kolathur

Chrompet

Velachery

Madipakkam

Poonamallee

Sholinganallur

Kelambakkam

Siruseri

Iyyapanthangal

Q 3 (Oct – Dec 2012) - Chennai Preference towards New and Resale Properties Source: IndiaProperty

Time Frame in Which a Consumer Desires to Make Property Purchase

Source: IndiaProperty

0%

10%

20%

30%

40%

50%

60%

70%

80%

New New/Resale Resale

0 1000 2000 3000 4000 5000 6000 7000 8000

<2 Months

<4 Months

<6 Months

>6 Months

Qtr3 Qtr2 Qtr1

Preference trends

for new and resale

properties have

beaten the

conventional

notion that

consumers prefer

only new houses –

focus on budget

Shift seen in

consumers’ intent

to make property

purchase – wait

and watch strategy

Chennai Price Movement Consumer Budget Preference Source: IndiaProperty

Focus of buyers in Chennai residential market over last three quarters has been

on 2BHK properties with 35% consumer demand having a budget of INR 30 –

50 Lacs. This indicates need for more and more affordable and mid income

residential properties in the city. Properties of Rs 1 Cr show only 10% demand.

Q 3 (Oct – Dec 2012) - Chennai Unit Type Preference

Source: IndiaProperty

Investors go to areas which have potential end-user participation. Increase in

number of buyers concentrating on mid segment residential properties, has led

0

1000

2000

3000

4000

Less

th

an 3

0

30

-5

0 L

acs

50

-7

5 L

acs

75

-1

Cr

Ab

ove

1 C

r

Less

th

an 3

0

30

-5

0 L

acs

50

-7

5 L

acs

75

-1

Cr

Ab

ove

1 C

r

Less

th

an 3

0

30

-5

0 L

acs

50

-7

5 L

acs

75

-1

Cr

Ab

ove

1 C

r

1 BHK 2 BHK 3 BHK

Qtr1 Qtr2 Qtr3

1 BHK 2 BHK 3 BHK 4 BHK 5 BHK

Focus on 2BHK

properties - 35%

consumer demand

seen within budget

of 30 – 50 L

Clear indication

seen for affordable

and mid income

residential

properties

Shift in demand for

2BHKs with over

65% consumer

demand

to 2BHKs being the most preferred unit type in Chennai with over 65%

demand over last three quarters of 2012.

This trend is generally seen with most investors eyeing potential rental income

from 2 BHK residential units which are easy to rent.

CONCLUSION

In 2013 Chennai real estate market is expected to see stable growth with

moderate appreciation. The residential market is likely to see few launches

with focus on reduction in the inventory overhang which currently lies between

6 – 8 quarters. With heightened Government’s focus on improving the

infrastructure scenario, an increase in interest for commercial as well as

residential properties is likely to be seen.

With an eye

towards potential

rental income,

preference for

2BHK units is more