Monday, January 15, 2007

Chennai calling

Economic Times
A spurt in commercial activity — largely led by the automobile industry and IT & ITeS sector — is pushing the demand for real estate projects in the southern capital
Raja Awasthi & V Nagarajan

CATCH the action. Defying political upheavals and though not marketed globally like its neighbours, Chennai has emerged as the favourite destination of corporates and MNCs. In fact, it has emerged as the most attractive city for offshoring services, according to a survey by A T Kearney, global management consultancy firm. The city was benchmarked on three major categories like financial costs, availability of skilled manpower and business environment.
The city is home to major automobile companies. Also, a world-class IT corridor is taking shape on the Old Mahabalipuram Road, a hardware corridor is on its way in the western part, while the northern part is gearing up for port expansion to house warehousing units. Auto major BMW is the latest entrant and is setting up an assembly unit in Mahindra Industrial Park. Industrial estates like Ambattur and Guindy are slowly giving way to IT units.
On the western side, a number of electronic hardware companies are setting up operations. The SIPCOT’s industrial park with an area of 2,469 acres has received an overwhelming response from varied sectors. Investment valued at Rs 4,700 crore is likely to flow into the area, according to reports. Realising the impending potential, land prices are already up 25-35%. Land prices on the arterial road are commanding a price of Rs 40-60 lakh per acre.
Interestingly, flexible FSI norms for IT sector development and lucrative deals have lured residential property developers to switch over to commercial property development. This has resulted in a sudden setback in terms of supply of residential units. Soaring land prices in the central business districts have pushed apartment prices to Rs 4,500-10,000 per sq ft in the prime locations.
In the absence of any largescale housing complex, Chennai is heading towards housing shortage which is one reason for the influx of property developers from Bangalore, Hyderabad, Delhi and Mumbai. On a conservative estimate, 4,000 apartments would be immediately needed as 40,000 people are going to be employed in Siruseri alone, say realtors. The only consolation is that 15 township projects are under various stages of planning, though concrete action plan is yet to see the light of the day.
Chennai’s local developers are launching medium scale projects which are being instantly absorbed by the market due to a strong demand. Akshaya Homes took a bold move to launch a residential project 25 km away from Tidel, which was a sell-out and three projects launched on the IT corridor in Sholinganallur and Perungudi have been entirely sold out. Bangalore’s Puravankara and Mantri are due to launch their projects, whereas others like Brigade, Sobha, Prestige, Salarpuria, Renaissance and Delhi builders like DLF, Unitech and Aerens are eyeing land parcels for projects. In fact, Unitech has acquired more than 2,000 acres in three different locations in Chennai.
Says Devinder Gupta, MD, DGS Realtors Ltd: “There’s a lot of job opportunities in Chennai — with the booming auto industry there. We are looking at new opportunities and will announce our plans soon.”
The demand for office space has been estimated in the region of 5-6 million sq ft this year. If the past absorption is any indication, then 90% of the commercial space has been absorbed by the IT and ITeS sector. Capital values for office range from Rs 2,900 to Rs 4,900 per sq ft. Rental levels are up by 15% in the past one year due to hike in interest rates.
About 10-15 mall-cum-multiplex projects are due to be developed as part of integrated township development in and around the city. These will add about 6 million sq ft of organised retail space in the city,says Santhosh Kumar CEO, property consultants Trammell Crow Meghraj.

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