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Property prices falling in Chennai
Chennai had seen property prices shoot up almost by 200 percent in the last two years but the situation seems grim at the present. The real estate sector in Chennai may be witnessing the beginning of a crash. Some realty players have sold only a couple of houses in the last six months. Experts say there has been a 90 percent drop in demand for residential projects since the start of the year.
This area along the Old Mahabalipuram Road was once mooted as the hottest realty destination in the city. It’s now turning out to be a dampener. There have been few takers for the over 14000 units of flats here, mostly due to lack of infrastructure.
Office rentals are also seeing a correction. The Central Business District in Chennai has seen a 15 percent drop. According to a Cushman Wakefield report, the expected supply of the office rental space for 2008 is 18 million square feet. But the absorption rate is a mere third of this. This is because the office rentals are largely driven by IT companies who are now deferring their expansion plans. No wonder then developers are slowing down their project plans. They say funds are hard to come by.
The PE funds are mostly looking at structured deals of the north of 30 per cent post tax ERR; now those kinds of funds they are being very choosy today, looking at valuations realistically from the perspective of what it was done earlier they have given discounting of what about close to 70 per cent now .
Most real estate developers in Chennai say they are struggling to sell flats, with one real estate player admitting he has sold just one flat in the last six months. Analysts say that this is the time for developers to sit back and take a realistic look at prices.
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