CHENNAI, January 3: The future of the commercial property market in Chennai seems dismal with more than one million square feet to go on the block in the next two years. The industry is in a state of gloom this new year with the market expected to dip further."Commercial property was a booming business in 1994-95 with rates twice those of residential property. Many property developers felt that it was the right business to sink their money into. However, it didn't turn out as anticipated for various reasons," says Prakash Menon, deputy general manager-operations, Ashok Leyland Properties.
The result is an over-supply with no takers. "Companies are not willing to invest in property at this juncture," said a senior official with a leading financial institution involved in housing finance.
Concurring with him are other real estate consultants. Say sources at Colliers Jardine, "With many multinational companies (MNCs) deciding to locate in Chennai, it was anticipated that they would invest in property, but
they preferred to either to lease property or rent it. It was increasingly felt that Chennai would attract more MNCs since it has already attracted corporates like Ford, Hyundai, Mitsubishi."
Property developers felt encouraged to put their money into commercial properties as they recognised that Chennai was an attractive option for many of these MNCs. Real estate prices are comparitively lower than other metros offering at the same time the other advantages of a metro.
"With political instability, many of the MNCs have adopted a wait and watch attitude to enter," the Colliers Jardine sources said, not wanting to name the MNCs who have evinced interest in locating in Chennai. Another reason that industry sources attribute to the unwillingness of corporates to invest in property is the financial crunch in the market.
Industry sources peg the fall this year at around 20-30 per cent. The value of commercial property in prime locations is Rs 4500-Rs 5500 per square feet and in other locations Rs 2000-Rs
3500 per square feet.
The major properties coming up are Raheja Complex, Spencer Plaza Phase 2, Arihant Trade Centre, Magonta Oberoi (hotel with an office and retail complex), Alankar Complex (coming up in the place of Alankar Theatre) and Voltas Centre, the Ispahani Centre at Nungambakkam High Road.
The properties that are located on Anna Salai (formerly Mount Road) on the stretch with the four lane system are no longer wooed by the corporates because of congested lane traffic and unavailability of parking space. The commercial business area is shifting to surrounding areas like Mahatma Gandhi Road, Radhakrishnan Salai and Cathedral Road.
The surprising fact is, industry sources feel, that rentals have picked up considerably after a minor dip (around 10 per cent) in the first half of the year. In prime locations, rentals range from Rs 40 to Rs 80 per square feet. And rentals will continue to pick up, feels the source at the FI, since developers may be forced to rent out their property being unable to
sell them.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
