CHENNAI INDIA REAL ESTATE OUTLOOK REPORT (January – June 2014)

For queries on data, contact Hitendra Gupta, Research

For any other query, contact Bertilda Fernandes, Marketing

Launches (units)

Absorption (units)

Weighted Avg Price (` per sq.ft.)

Jan – June 2014 11,377 -32% Y-o-Y

July – Dec 2014 (E) 10, 488 31% Y-o-Y

2014 Year End (E) 21,865 -12% Y-o-Y

Jan – June 2014 10,315 -26% Y-o-Y

July – Dec 2014 (E) 11, 929 14% Y-o-Y

2014 Year End (E) 22,244 -9% Y-o-Y

Jan-June 2014 4,407 5% Y-o-Y

2014 Year End (E) 4,483 3% Y-o-Y

Residential

Market Overview

New Completions (mn. sq.ft.)

Absorption (mn. sq.ft.)

Vacancy %

Jan-June 2014 1.5 -11% Y-o-Y

July-Dec 2014 (E) 1.1 -58% Y-o-Y

2014 Year End (E) 2.6 -38% Y-o-Y

Jan-June 2014 1.8 47% Y-o-Y

July-Dec 2014 (E) 2.2 -11% Y-o-Y

2014 Year End (E) 4.0 7% Y-o-Y

June 2014 22%

2014 Year End (E) 20% Office

Weighted Average Rent (` per sq.ft. per month)

Jan-June 2014 48 6% Y-o-Y

2014 Year End (E) 50 5% Y-o-Y

Market Overview

Residential

Launches

Absorption

Demand & Supply Trend - 2014

Chennai witnessed a

downward trend in demand

since 2013

Demand for homes dropped

by over 17% in 2013, it is

expected to fall by 9% in 2014

New launches are set to

decline by 12% in 2014

4,000

5,000

6,000

7,000

8,000

9,000

10,000

No

. o

f u

nit

s

Residential Market

Unsold Inventory Level - QTS

The QTS ratio has been rising

since September 2012,

signifying a weak market

Term

Developers have taken

cognizance and have reduced

fresh launches by 32%

42,450 units remain unsold as of June 2014 and will take 7 quarters

for the market to absorb

3

4

5

6

7

8

9

No

. o

f Q

ua

rte

rs

Residential Market

H2 2014 Forecast

Half-yearly Launches and Absorption Trends

New launches are estimated to

increase by 31% during the

same period

Compared to H2 2013, sales

volume will increase by 14%

in H2 2014

Positive outlook for the IT/ITeS

sector bodes well for the Chennai

market

Sales volume is expected to recover from H2 2014 onwards

20

,33

2

16

,74

7

16

,83

2

8,0

15

11

,37

7

10

,48

8

14,4

61

14

,96

1

14

,02

0

10

,42

4

10

,31

5

11

,92

9

-

5,000

10,000

15,000

20,000

25,000

No

. o

f u

nit

s

Launches Absorption

Residential Market

Weighted Average Price Trend

Half-yearly Weighted Average Trend

The bumpy ride in demand and supply

does not seem to have any significant

impact on prices as it continues to move

upwards

The weighted average price has

increased by 5% from `4,2000/sq.ft. in

H1 2013 to ` 4,400/sq.ft. in H1 2014

Going forward, prices to increase by 3% in H2 2014 to `4,480/sq.ft. on the

back of a moderate recovery in sales volume

3,500

4,000

4,500

5,000

Residential Market

New Launch Analysis

Micro-Market Split of Units Launched

Limited opportunity for development

in Central Chennai and huge

competition in the South Chennai

region, propelled developers to opt

for West Chennai

South

West North

Central

In West Chennai share of new

launches has risen to 28% in H1

2014, over 22% in the same period

last year

North Chennai observed the

sharpest fall in new launches

1%

22%

2%

75%

H1 2013

3%

28%

0% 69%

H1 2014

Residential Market

16,832 11,377

Ticket Size Analysis

Ticket Size of Launched Units by Micro Markets

79% of the new units

launched in West Chennai

were below the ticket size of

` 5 mn

New launches are

concentrated in the

peripheral markets, where

prices range between

`4,000/sq ft and `6,500/sq ft 0%

20%

40%

60%

80%

100%

<2.5 mn 2.5-5 mn 5-75 mn 7.5-10 mn 10-20 mn >20 mn

South

West North

Central

Residential Market

Absorption Analysis

Micro Market Split of Units Absorbed

OMR, GST Road and various

other nearby locations in South

Chennai have emerged as the

most preferred areas for

development

West Chennai is the 2nd largest

market in terms of preference

due to its affordable pricing,

proximity to city centre and

presence of employment hubs

3%

29%

2% 66%

H1 2013

South

West North

Central

3%

26%

3% 68%

H1 2014

Residential Market

14,020 10,315

Micro Market Health

Age of Inventory compared to QTS

South

West North

Central

West Chennai is the healthiest

micro-market, as it has the

lowest QTS and minimum age

of unsold inventory

North Chennai’s health is the

poorest, as it continues to carry

the excess unsold inventory of

projects that were launched

more than two years ago

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

5 7 9 11 13 15

Ag

e o

f In

ven

tory

QTS

Central Chennai with lowest

inventory is the second best

market in Chennai, in terms of

QTS and age of inventory

Residential Market

Price Movement

Location Price range in H1 2014

(`/sq ft) 12-month change 6-month change

CENTRAL CHENNAI

Anna Nagar 9800-10100 4% -1%

Adyar 16500-17500 3% -1%

Kilpauk 15000-15100 0% 2%

T. Nagar 18500-18700 1% 1%

Alandur 7000-7200 1% 1%

WEST CHENNAI

Porur 5100-5300 2% -2%

Ambattur 4100-4500 2% 0%

Mogappair 6100-6700 2% 0%

Iyappanthangal 3900-4300 -2% 2%

Sriperumbudur 2700-3000 -2% -3%

Residential Market

Price Movement

Location Price range in H1 2014

(`/sq ft) 12-month change 6-month change

SOUTH CHENNAI

Perumbakkam 4100-4300 2% 2%

Chrompet 4200-4700 1% 3%

Sholinganallur 4300-4800 -1% -3%

Guduvancheri 3150-3300 1% -2%

Kelambakkam 3525-3625 2% -1%

NORTH CHENNAI

Tondiarpet 4200-4300 1% -1%

Kolathur 4300-4500 2% 2%

Madhavaram 4500-4700 2% 2%

Perambur 6000-6400 3% 3%

Ponneri 3500-3600 1% 1%

Residential Market

Key Takeaways

Due to unsold inventory, launches during 2014 would decline by12%,

compared to absorption (9%)

The weighted average price expected to increase by 3% by the end of

2014 against a 5% witnessed in H1 2014

Ponneri has been announced as one of the 100 planned smart cities

that augur well for the entire North Chennai residential market

The West Chennai micro-market, with an inventory of 6 quarters and an

inventory age of 8 quarters, fares the best in Chennai city

Residential Market

Office

Vacancy Trend

Office Space Stock and Vacancy Level

Vacancy levels have been

falling since H1 2013 on the

back of a steady rise in

absorption and a slower pace

of completion of new projects

The vacancy level observed

during H1 2014 was 22%,

down from 24% in H1 2013

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0

10

20

30

40

50

60

70

Mn

. S

q.f

t.

Stock Occupied Stock Vacancy (RHS)

Total office stock

56.2 mn.sq.ft. Occupied

43.8 mn.sq.ft Office Market

New Completion and Absorption

Absorption numbers during

H1 2014 were better than

expected due to improved

sentiment in the IT/ITeS

and BFSI sectors

While 1.8 mn sq ft of office

space was absorbed in H1

2014, only 1.5 mn sq ft of

new projects were

completed

3.1

3.8

1.7

2.5

1.5

1.1

1.2

2.1

1.2

2.5

1.8

2.2

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Mn

. S

q.f

t.

New Completion Absorption

Office Market

H2 Forecasts

2.23 mn sq ft of office space to

be absorbed during H2 2014, a

24% increase compared to H1

2013

For the year 2014, absorption

is expected to touch 4.02 mn

sq ft - an increase of 8% from

3.74 mn sq ft in 2013

The market will see new completions of 2.56 mn sq ft for 2014, as new

projects amounting to 1.07 mn sq ft are expected to be completed in the

remaining 6 months of the year

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0

10

20

30

40

50

60

70

Mn

. S

q.f

t.

Stock Occupied Stock Vacancy (RHS)

Office Market

Weighted Average Rents

30

35

40

45

50

55

60

`/s

q f

t /m

on

th

Rental value has increased by

6% over the last 6 months

The city’s weighted average rental value is forecasted to increase from `47/sq ft/month in

H2 2013 to `50/sq ft/month in H2 2014 – registering a growth of 5%

Relatively weak pipeline of new

supply will lead to decrease in

vacancy levels to 20% by the

end of 2014, consequently

leading into increase in rentals

Office Market

Sectoral Analysis of Demand

IT/ITeS Financial Services Manufacturing Other Services

H1 2013 62% 4% 19% 15%

H2 2013 29% 20% 28% 23%

H1 2014 47% 6% 26%

21%

Share of the IT/ITeS sector

has decline to 47% during H1

2014 from a high of 62%

during H1 2013

The share of the other services sector has increased to

21% from 15% a year ago due to strong demand from

consulting, media and healthcare companies

A few big-ticket deals by AstraZeneca, ABB,

Ford and Chrysler have led to increase in the

share of manufacturing sector from 19% in

H1 2013 to 26% in H1 2014

Office Market

Deal Size Analysis

Average Deal Size and Number of Deals

During H1 2014, Chennai

witnessed a substantial jump

in the number of deals,

though the average deal size

has reduced by 12% during

the same period

The average size of

transactions has reduced to

23,600 sq.ft. in H1 2014 from

26,800 sq.ft. in H1 2013 and

from 55,000 sq.ft. in H2 2013

0

20

40

60

80

-

10,000

20,000

30,000

40,000

50,000

60,000

H1 2012 H2 2012 H1 2013 H2 2013 H1 2014

Nu

mb

er

Sq

.ft.

Average Deal Size (Sq ft) Number of Deals (RHS)

Office Market

Business District-wise Analysis

Manufacturing, small and mid-

sized IT/ITeS companies and other

services sectors are the primary

demand drivers in the CBD

markets

Micro-market Split of Absorption

14%

12%

21%

2%

51%

H1 2013

19%

7%

30% 0%

44%

H1 2014

CBD

PBD Ambattur

SBD SBD OMR

PBD OMR & GST

Office Market

1.2 mn

sq.ft.

1.8 mn

sq.ft.

Business District-wise Analysis

SBD has emerged as the most preferred market during H1 2014, as its share in

absorption has increased to 30% from 21% in H1 2013

Proximity to the city centre and easy access to the airport and presence of

excellent infrastructure has also attracted a healthy mix of occupiers from all

sectors towards SBD

The CBD markets have regained their share in total transaction, which they had

been losing out to SBD OMR markets over the last few years

Office Market

Business District-wise Rents

Business District

Rental Value Range in H1

2014

(per sq.ft. per month)

12 month change 6 month change

CBD and off-CBD 65–70 1% 11%

PBD - OMR and GST 22–35 0% 2%

SBD 45–58 4% 4%

PBD - Ambattur 18–29 5% 2%

SBD-OMR 45–58 7% 1%

Limited number of new project completions, low supply pipeline and steady demand have

helped the rents in CBD & Off-CBD to soar by 11% over the 6 months

Proximity to the Chennai airport and the presence of a developed retail infrastructure

have continued to work in favour of SBD and SBD OMR leading into faster rental growth

Office Market

Key Takeaways

In H1 2014, the total office space stock in Chennai stood at 56.7 mn sq. ft. while the

occupied stock stood at 42.5 mn sq. ft.

Better-than-expected absorption numbers of over 1.67 mn sq. ft. were reported during

H1 2014, registering a growth of 49% over H1 2013

City’s vacancy level is projected to decrease to 24% in H2 2014 as compared to 25%

in H1 2014

The CBD will continue to remain an important market in terms of value, with non-

IT/ITeS sectors contributing to the office space demand

The Chennai Metro Rail Phase-I between Koyambedu and Alandur will benefit the

SBD business district the most

2.23 mn sq. ft. of office space expected to be absorbed in the Chennai market over the

next six months

Office Market

CHENNAI INDIA REAL ESTATE OUTLOOK REPORT (January – June 2014)

For queries on data, contact Hitendra Gupta, Research

For any other query, contact Bertilda Fernandes, Marketing