Real estate in the current economic scenario and its impact on Chennai’s property market

Abstract

The real estate sector in India has evolved over the ages and has seen many ups and downs. The boom in this sector in the recent past can be attributed to foreign investments and the growth of the IT sector which started around the second millennium. Such opportunities in the sector have caused the real estate industry in India to mature from unorganized family run businesses to corporate and IPOs. The boom has also brought in major Indian conglomerates like Tata and Reliance into the real estate industry. This was also followed by the retail revolution which saw the major cities in the country being filled with malls, multiplexes and food courts. The increase in IT jobs and the rise in the income of the Indian middle class saw huge rise in the demand for both commercial and residential properties. This also caused the property prices in cities to sky rocket. The Tamil Nadu Government also took the initiative to develop the stretch running from Guindy towards Mahabalipuram along the Buckingham canal as the I.T hub of Chennai. As a thrust towards this the government put up its own I.T Park – The Tidel Park – at the beginning of this stretch. This was also followed by the proposal of an SEZ around 25kms down the road. The boom in IT services and the promise from the government to provide various infrastructure supports from express highway to skybus and metro saw heavy investments from IT majors like TCS, Infosys and Wipro setting shops on this corridor. This was followed by numerous small time promoters coming up with their own commercial outlets for sale and lease along the corridor. With the increasing number of working population along the stretch and the long commuting distance from the city to the work place the demand for housing was growing large. The working population along the corridor started looking for permanent living spaces within the corridor. This led to some major housing developers of Chennai like Arihant and Chaitanya come up with mass housing projects. But now with the economic downturn the situation looks grim in this IT corridor of Chennai. Unavailability of credit and fall in demand has caused the realty firms operating in Chennai to stall all their operations along the corridor. The corridor which was only recently the bustling construction hub of Chennai is now devoid of any construction activity. The report suggests a strategy level change and to target the lower middle class segment with affordable housing. It has also been suggested to bring in more transparency into the system to attract investors.