Nina Varghese

Across India, the rising demand for both commercial and residential real estate has driven prices northward. In Chennai, like other major metros, the key drivers have been Information Technology (IT) and Information Technology Enabled Services (ITES).

The demand for all categories of housing (premium, middle and lower income groups) has grown, thanks to the easy finance options and the desire of more people to own houses rather than rent them.

Propelled by the development boom, land prices have soared during the last six months. The price increase is not just in one area, but across the city, said Mr Ajit Kumar Chordia, Director, Khivraj Tech Park Ltd, promoters of Olympia IT Park inside Guindy Industrial Estate.

However, some fear that the price rise would not be beneficial for business. If prices continue to shoot up, it might drive business away, says Mr N. Anathanarayanan, Chennai Head of Chesterton Meghraj, an international property consultants firm.

He said the manner of price increase is worrying, to say the least. Landowners expect unrealistically high prices for their land and this is likely to have the opposite effect, he said. Though many projects have been announced, few are likely to leave the drawing board, real estate sources said.

One of the main attractions of Chennai has always been the favourable land cost. When the land cost goes up, the entire cost of development would go up too, Mr Ananthanarayanan said.

For instance, on the Old Mahabalipuram Road (OMR), project as the IT destination, prices have shot up from Rs 60-70 lakh a ground six months ago to almost Rs 1.5-2 crore a ground.

Further down the road, at places like Chemmancheri, prices have risen by about 25 per cent to hover at Rs 1-2.5 crore a ground, real estate sources said. Realtors are advising clients not to go beyond Chemmancheri as the infrastructure is inadequate at these places. This, in turn, increases the price pressure on land closer to the city, they said.

In a prime residential area like Boat Club Road, rates have shot up to about Rs 1.5 crore a ground from about Rs 60 lakh a ground, a year ago. In places like San Thome, it is about Rs 1 crore for a ground from Rs 50 lakh earlier.

Land prices inside the Ambattur industrial estate has risen nearly 40 per cent while the Guindy Industrial Estate, which has proximity to the airport, a suburban transport system and hotels has shown an increase of almost 100 per cent in the last six months, sources said. In the suburbs, large townships are being developed. According to Mr Subba Reddy, Managing Director, Ceebros Property Development Pvt Ltd, many people prefer such townships which come with several conveniences. For instance, the associations have plumbers, carpenters and electricians on call, and better security arrangements, he said.

Another problem faced in Chennai is that large tracts of land are unavailable for major projects. Developers are now coming out with large condominiums in upmarket areas like Boat Club Road, Bishop Garden and Haddows Road. These apartments located in the heart of the city cost over Rs one crore each and offer lifestyle facilities such as a health club, library, laundry, and jogging track.

In recent times, Chennai has also attracted major developers from other parts of the country. DLF from Delhi, RMZ from Bangalore and Singapore-based Ascendas are some of the players who are launching mega projects and changing the face of real estate in Chennai, sources said. They also set standards in quality and design.

Mr Reddy said this change was bound to happen. Earlier, Chennai developers were coming out with smaller projects, but now the market is ready to absorb large developments.

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