CommonFloor Report Top rental destinations in Chennai 1
Introduction: Chennai has become an attractive destination for real estate investment with demand for residential units increasing on a daily basis. Employment opportunities and better standard of living are the key reasons for mass migration of people from different parts of Tamil Nadu and other states. The past decade has seen over 2 lakh people migrating to Tamil Nadu from Karnataka and Kerala alone, most of them settling in Chennai (Urban India, 2011: Evidence). Housing over 8 million people, Chennai residential realty demand has been steadily increasing every year (Census, 2011). There is high rental demand especially in southern Chennai. This is mainly due to the concentration of IT industries in the area. People seeking jobs in these industries tend to settle in rented residential units mostly for quick settlement and easy access. With the urban sprawl moving towards the south and more projects coming in every quarter to satisfy the demand, people consider investing in these projects to rent them for quick returns. This can also be validated by analyzing CommonFloor Listing data. The most popular rental localities are mostly located in the south having most number of listings. The following are the most popular localities in the order of most number of listings whose rental trends will be analyzed in this report. 1. Tambaram 2. Velachery 3. Madipakkam 4. Medavakkam 5. OMR 6. Chromepet 7. Porur 8. Anna Nagar. Figure 1 Map showing the rental destinations All these localities comprise more than 30 per cent of the market for rental listings with Tambaram, Medavakkam and Velachery leading the list. Interestingly, these localities are also located in the south of the city proving the point that demand is skewed towards the south of the city. Tambaram Located in southern Chennai, Tambaram embarked its presence since early 17th century as a small village in the outskirts of the city. It was a camp for English East India Company. Today with a population of around 174,787 (Census, 2011) the locality is one of the largest real estate micro market. In late 1930s, the Madras Christian College was moved to this locality. This initiated the development of the modern Tambaram and pace of development increased when the Beach to Tambaram suburban line became functional. The GST road that passes through the heart of the locality helps the movement of traffic in and out of the area. The micromarket has two other arterial roads in the west namely the Chennai Bypass and Gandhi road that assist in traffic movements. These roads connect the locality with other parts of the city and helps in intercity connectivity as well. The locality is 12 km away from the Meenambakkam international airport. Tambaram also has its own railway station, which is part of both suburban railway and a junction in South Indian Railway line. Various factors are leading to an increased rental demand in this micro market. The rates in Tambaram are affordable for the working class population. Since it is located close to industries, many people tend to rent a flat here. The micro market is also well connected by road and trains which offers accessibility to all parts of the city. Additionally, Tambaram is crowded with several educational institutions. For easy access and daily commutation to these institutions, both parents and students seek houses in this locality. 2
Figure 2 shows BHK-wise availability for rent during August 2014. It can be seen that 2BHK homes have maximum availability for rent and these mostly fall under the affordable category. In Fig. 3 we can notice that one can fetch a 2BHK apartment in the price range of Rs 5,000-20,000. Interestingly, there are very few 2 BHK units in the luxury segment. Maximu availability is in the affordable or midsegments. The 3BHK apartments are available in the price range of Rs 7,000-25,000. Figure 2: Chart showing BHK availability Source: CF Listing Data Fig. 4 indicates the sizes of different segments. For instance, 2BHKs are available in the size range of 731-1240 sq. ft. and 3BHKs are available in the size 850-1440 sq. ft. Figure 3 Chart showing the prices of different residential units Figure 4 Chart showing the sizes of different residential units Figure 5 Chart showing the rental yield for different properties Fig. 5 shows the rental yield of different properties in the locality. Rental yield is the percentage of return that an individual acquires when he invests in an asset. The rental yields of different type of properties are shown in the graph. It shows that the rental yield for 2BHK with considerable demand is 3.2 per cent while for 3BHK it is 3.7 per cent. The graph clearly shows that investing in properties so as to rent them out is a profitable investment in Tambaram. Hence, the demand for investing in rental properties are rising steadily. The most profitable investment in Tambaram is 1BHK house with nearly 6 per cent rental yield. 3
Quick Facts Velachery 1. Good rental yield. 2. Located close to IT industries in the OMR and better accessibility. 3. Affordable prices and well-developed infrastructure and connectivity. 4. Close to airport and other major localities for easy access. 5. Offers rental options with highest rental yield in the city. Velachery is one of the coveted real estate hotspot where anyone would like to own a property or build his or her livelihood. This micro market occupies a prominent position in proximity to OMR. Velachery was mostly covered by farmlands until early 1990s. But the locality started to get its shape after the widening of the Chennai Bypass road during 2005. The development of this locality is mainly due to the IT industries around it and near the OMR. Velachery main road connects the locality to other arterial roads and helps in commutation of individuals. The international airport is 8.5 km away. The locality has a railway station, which is a part of the suburban railway network. The IT companies along the OMR corridor mainly drive the demand for Velachery. The locality has well developed infrastructure and good connectivity, which keeps the demand high. Velachery has higher rental price when compared to the surrounding localities due to the amenities that the apartments provide. Figure 6 Chart showing BHK availability. Fig. 6 shows the BHK availability for rent. The most preferred property type here includes 2BHK apartments. This is due to the presence of huge amount of working class people who prefer 2BHK apartments which suits their budget and maintenance cost bearing. There are fair amount of 3BHKs available for rent. While 2BHK are about 57 per cent a half of the total listings, 3BHK are near one- third the amount. The huge peaks and the small columns in Fig. 7 suggest that Velachery has availability of both luxury and affordable type units for rent. 2BHKs are available in the range of Rs 7,500-38,000 ranging between affordable to upper middle class type apartments. Same is the case for 3BHK apartments and their prices are in the range of Rs 9,800-35,000. 4
Figure 7: Chart showing rental prices and sizes of different residential units. The rental yield in this micro market is not high enough to match the demand and the hype the locality witnesses. This is mainly because many opt to buy properties here and settle in. As for rent, they opt for cheaper surrounding localities where the rental prices are low and affordable. Figure 8 Chart showing rental yield. 1 BHK houses give the highest return with 3.66 per cent rental yield, mostly occupied by the affluent class. Whereas 2BHK and 3BHK yield 2.78 per cent and 2.31 per cent respectively. Quick Facts 1. High rental yield for 1 BHK apartment. 2. Locality consists of many luxurious and high-end projects. 3. Higher number of 3BHK apartments compared to other localities. 4. Rental prices are high compared to other localities in the surrounding area. Madipakkam Madipakkam, another important suburb located in South Chennai has been attracting a fair rental demand in the last few years. Located in the centre of other important localities like Velachery, Medavakkam, Pallikaranai, Pallavaram and Nanganallur, the demand for rental real estate is on a steep climb. The Velachery main road is the most important artery for traffic commutation of this micro market. The OMR and GST road are also very close by, which gives access to the IT industries in the south and connects the micro market to other localities in the Central and North Chennai. The locality is 6 km away from the International airport. 5
Madipakkam is one of the most desired locality for people with limited budget. Most of the residential units here are rented out at affordable rates. Being close to the IT industry corridor in OMR the locality attracts huge demand from those companies who work in lower hierarchies. Add to this, the locality also has well developed infrastructure and well established connectivity. Figure 9 Chart showing BHK availability. Fig. 9 shows the BHK availability in the locality. As expected, there are multiple units available for rent in 2BHK segment since demand is exceedingly high. While 1BHK and 3BHK are found in almost equal proportions. This is mostly due to cheap 2BHK units available for investment that can be rented out. Figure 10 Charts showing rental prices and sizes of BHKs Fig. 10 shows the rental price for different types of properties. Most properties listed are under affordable category for workers in IT industry. One can fetch a 2BHK in Madipakkam for a mere Rs 5,000 rent per month. 2BHK price ranges are Rs 5,000-18,000 while 3BHK price ranges are Rs 7,500-25,000 and their sizes are of range 639-1314 sq. ft. and 1000-1414 sq. ft. respectively. Figure 11 Rental yield.. 2BHK rental yields around 2.74 per cent and 3BHK yields nearly same amount of about 2.24%. But the 1BHK yields are high up to 3.1%. Quick Facts 1. Affordable rental prices. 2. Rental yields are low compared to high yielding localities like Velachery but still good enough. 3. Strategically located in the middle of popular southern suburbs. 4. Good connectivity and well-developed infrastructure. 6
Medavakkam Medavakkam is a residential area in South Chennai, located close to the OMR road and other popular localities like Velachery, Madipakkam, Sholinganallur and Tambaram. This locality has flashed its name in several reports as the fastest growing suburb in India in terms of real estate investments and returns. Connected by GST road and OMR road, the locality has access to most of IT industries in the south. The demand here is driven mainly from the IT professionals who look for affordable housing with easy access to their work places. The locality is 14 km approximately from the International airport and the Tambaram station is nearest railway station. The demand for this suburb has been ascending steadily and prices of houses are expected to rise above 110 per cent by 2017 (Knight Frank housing report, 2012). The rental prices in Medavakkam can be grouped as affordable and middle income group, which are mostly leased by the working class group of lower hierarchy. Figure 12 Charts showing BHK availability.. The availability of residential units according to different types of BHK segmentation is shown in Fig. 12. The 2BHK units constitute a major part followed by 3BHK. This is because the apartment prices are cheap and end-users tend to reside in 3BHKs while investors buy 2BHK so as to rent them out. Most apartments available here in Fig. 13 can be classified as affordable due to cheap rental prices. However, demand is high here owing to its proximity to OMR. One can get a 2BHK for rent at merely Rs 6,000 per month. There are multiple options of 2BHK units available in the locality. Few luxury properties are also available. Similarly, for 3BHKs the price is in the range of Rs 8,000-50,000 per month. The sizes of 2 and 3 BHK are 550-1280 sq. ft. and 1084-1700 sq. ft. respectively. Figure 13 Charts showing rental prices and sizes of BHKs. The rental yield in Medavakkam is high compared to the other localities we have seen until now. Most apartments have more than 3 per cent yield showing that this locality is a profitable micro market for investment. 7
Fig. 14 shows different types of rental yield for Medavakkam locality. The highest yield for apartments is for 2BHK units, which is also the most in demand for rent. It gives 3.46 per cent yield. The 3BHK apartments command a fair yield of 2.55 per cent and 1 BHK a comfortable 3.03 per cent. This micro market is one where an investor can invest for a steady profitable income. Figure 14 Chart showing rental yield.. Quick Facts 1. Affordable rental rates. 2. Stable market. 3. Well established connectivity and infrastructural development. 4. 2BHKs are the dominant type of apartments. OMR Old Mahabalipuram road or Old Mamallapuram road extends from Madhya Kailash temple in Adyar in the north to Mahabalipuram in the south. The stretch is also known as Rajiv Gandhi Salai or the IT corridor of Chennai. The road dots many IT companies and is on the state highway. The stretch not only attracts demand for itself but also for the surrounding micro markets. One of the main reasons why Chennai s urban sprawl is edging towards the south is the emergence of the IT corridor, the OMR. The stretch creates huge residential realty demand in South Chennai. The locality comprises both affordable and luxury houses for rent. This is mainly due to luxury, comfort and accessibility the locality offers. The micro market is also crowded with hotels, supermarkets and various types of commercial outlets. Figure 15: Chart showing BHK availability. Figure 15 shows the distribution of different BHK segments available. -----------------------------------------------------------------x-x-x-x-x------------------------------------------------------------------ 8
Figure 16 Chart showing rental prices Figure 17 Chart showing different sizes. There are about 62 per cent 2 BHK properties while 26 per cent are 3 BHKs. There are a few 1BHKs and an equal number of 4BHK as well. Figure 16 indicates that one can rent a 2BHK from a starting price of mere Rs 7,500 and the prices go up to Rs 27,000 per month. 3BHKs are much more costly. 3BHKs prices go up to a lakh rent per month. Figure 16 shows that the sizes of these apartments vary between 780-1300 sq. ft. and 970-2000 sq. ft. for 2BHK and 3BHK respectively. Figure 17 Chart showing rental yield The rental yield in OMR, as seen in Figure 17, is over 3 per cent in most of the BHK segments. The luxury 4BHK apartments give the maximum yield of about 5.92 per cent. The other type of apartments i.e. 1BHK, 2BHK, 3BHK give 3.87, 3.5, and 3.3 per cent respectively. This clearly shows that it is a profitable market for rental investments. Quick Facts 1. EXcellent rental yield. 2. Preferred mostly for luxurious type unit. 3. Heavy demand due to the concentration of IT industries. 4. Good connectivity and infrastructure. 5. Numerous upcoming projects. 9
Chromepet Chromepet is one of the important southern suburb of Chennai in proximity to Tambaram. Chromepet s history dates back to second century when Thondaimans of Early Chola Kingdom ruled the land. It was then known as Thondaimandalam. The locality got its modern name after the establishment of Chrome leathers industry. The development of the locality was initiated in early 1950s when the land around the leather factory was auctioned. The GST road passes through the heart of the locality. This artery is the main source of traffic flow in and out of the locality. The locality has its own railway station, which is a part of the suburban railway network. The locality is 4 km away from the Chennai international airport. Lower hierarchy working class group majorly occupies Chromepet. The demand for the locality comes through the affordable prices and the well-developed infrastructure, which the locality provided. The banks of the GST road along the locality are clustered with commercial units and the moving internally the locality is crowded residential units. Figure 18: Chart showing BHK availability. The location of Chromepet favours the working class population an easy access to their workplaces and hence most of the demand is for the 2BHK apartments, which is affordable for them. The chart below shows the BHK availability in Chromepet. The listing data shows that the availability of 1BHK and 3BHK are nearly same proportion while 2BHKs there are 67% 2BHKs are available One can fetch a 2BHK in the range of Rs 6,500-23,000 per month from the various options available, affordable to upper mid income group. 3BHKs are bit pricey and are in the range of Rs 10,000-30,000 per month. These segments have the sizes of 590-1160 sq. ft. and 1050-1850 sq. ft. The different types of properties, their rents and the sizes are shown in the consecutive charts. Figure 19 Rental price for different properties.. 10
Figure 20 Sizes of different properties.. Figure 21 Rental yield. The rental yield for the locality is high. 1BHK and 2BHK yield nearly 3% and other yields are average yields. 1BHK yield is 3.45 per cent while 2BHK is 2.93 per cent. Other types give a fair yield. Quick Facts 1. High rental yield. 2. Good neighbourhood with every amenities with a km radius. 3. Well-developed locality with good infrastructure. 4. Good connectivity with frequent buses. Porur Porur, by name, means land of wars. The land dates back to Pallava period who used it as their battlegrounds. The modern development to the current state of the city happened during the early 1960s when the locality got crowded with chemical industries. Three important roads pass through the locality. The Chennai Bypass road, Poonamalle highroad and Arcot road, connects the locality to other micro markets in the city. These roads serve as medium for the in and out of traffic into the locality. The demand for the locality is from the workers of the industries around the locality. The property types range from affordable, mid income to luxury type apartments. The demand for all these properties are robust. The following chart shows the BHK availability in the locality. The rental costs vary in this micro market from affordable to high priced luxury. The demand for the micro market is due to the infrastructural development and the proximity of the locality to the centre of the city. Figure 23 suggests that one can fetch a 2BHK in the price range of Rs 6,500-20,000. 3BHK prices are in Figure 22 BHK availability. the range of Rs 11,000-55,000 while 4BHKs and 5BHKs are also available and goes as high up to a lakh per month. The sizes of 2BHK and 3BHK on average are 916 and 1516 sq. ft. respectively. Figure 23 and 24 shows the sizes and rental prices of different properties. 11
The crests and troughs in Figure 23 shows that there are a number of properties available at varied price range. As per Figure 25, the properties in this locality also give a fair amount yield in returns. The apartment s yields are over 3 per cent while the others are considerably low. This also suggests that in Porur, demand is shifted more towards renting apartments than houses and villas. Figure 23 Rental price for different type of properties. The recent Porur tragedy, the collapse of newly. constructed apartments that killed many still strives in the hearts of the people around there. This has affected the market sentiments of renting and buying flats in Porur. The market is slacking at present but expected to pick back its pace as time goes by. Figure 24 Sizes of different types of properties.. Quick Facts Figure 25 Rental yield.. 1. Located close to the centre of the city. 2. Classy apartments with luxurious amenities. 3. Good infrastructure and connectivity. Anna Nagar Located in the centre of the city, this micro market is one of the most posh micro markets of Chennai. The locality is well planned and well established. Formerly known as Naduvankarai, this locality s name was then renamed Anna Nagar, after the former Chief Minister of Tamil Nadu, Anna Durai. Poonamalle high road, New Avadi road and Jawaharlal Nehru road are the three arteries that bound the micro market and are responsible for the traffic movements. The suburban railway station in Villivakkam is the nearest station for MRTS access. The locality by itself is getting its own monorail station in the upcoming CMRL project. 12
Similar to other localities we mentioned above, there is ample supply of 2BHKs available for rent in this micro market. However, the number of 3BHK properties available for rent is proportionately higher than other localities. Most people renting out houses or apartments here belong to the high-end income groups. This is the main reason for the change of availability trend. Figure 26 shows the different proportions. As per Figure 26, the rental prices start from affordable range and go up to luxury for the affluent class. One can fetch a 2BHK for a mere Rs 7,500 here. However, the prices go high up to Rs 35,000. 3BHKs are in the range of Rs 10,000 - Rs 50,000. These apartments have an average size of 1000 sq. ft. and 1700 sq. ft. for 2BHK and 3BHK respectively. Figure 27 shows the size and rental price variation for different type of properties. Figure 26 BHK availability. Figure 27 Sizes and rental prizes of different properties.. The rental yield in the market is low compared to other localities analysed above. This is mainly due to exorbitant prices of properties, which cannot be charged with respective proportional rent practically. Figure 28 shows the rental yield for different properties. Figure 28 Rental yield 13
Quick Facts 1. Located in the centre of the city. 2. Luxurious apartments are the most commonly available property type. 3. Well planned and well organised micro market. Comparative analysis of the local Figure 29 Chart showing 2BHK availability in all top rental destinations Figure 30 Chart showing 3BHK availability in all top rental destinations The availability of 2BHKs for rent is more evenly distributed in all the localities as compared to the 3BHK localities. Most number of 2BHKs are available in Medavakkam and Velachery. The main key reason for this is the affordable property values, proximity to the IT corridor and low liveability costs. It can also be noticed that in OMR the number of 3BHKs are drastically high as compared to 2BHK properties. 2BHKs are the most preferred type rental residential unit in any city. Figure 31 Rental yield of top rental destinations The average rental yield for different types of apartments in various micro markets are shown in the figure 31. The rental yield in OMR is highest masking other rental yields in the south. The demand for the micro markets are high and the owners tend to rent them in lower rates, which results in lower rental yield in the other micro markets. Porur and Anna Nagar are comparatively high. Thus, rental prices are vary in different localities not only based on the demand for the locality but also the type of people, location and amenities. Conclusion Rental demand is on an upswing in Chennai, especially in the south. The demand exists in all types of residential units including houses, apartments, villas and builder floors with different sizes from 1BHK to 4BHK and varying ticket sizes. Even though most of the focus is towards affordable rentals, there is huge demand for luxury apartments too from the high-end part of the society. With urban sprawl spreading towards the south and demand increasing robustly, the demand for rental accommodation is expected to rise manifold in the future. 14
CommonFloor.com maxheap Technologies Pvt Ltd #298,299 SGR Towers 7th Cross, Domlur, Bangalore - 560071. ---------------------------------------------------------------------------------------------------------------------------------- Authors Antone Aravind T Research Associate tunuguntla.sannihith@commonfloor.com Bangalore Vishal Nagula Research Analyst nikunj.joshi@commonfloor.com Bangalore Meha Singla Sr Manager -Domain Research meha.s@commonfloor.com Bangalore ---------------------------------------------------------------------------------------------------------------------------------- Disclaimer: The document above is written by the Domain Research Team at Commonfloor.com, India s fastest growing real estate website known for its unbiased prognosis in Real Estate sector. The information provided in this report is based on CommonFloor data which is collected from various publicly known sources viz, websites, documents and maps. It should be considered as a guideline and not in absolute certainty. While care has been taken for groundwork, no responsibility is accepted for the accuracy of whole or any part. This information is confidential and the sole property of CommonFloor.com. It should not be reproduced in any form, in part or whole, without prior permission. 15