OMR in big demand by premium realtors

 

 

If there is an area that reflects the fortunes of Chennai’s residential real-estate, it must be the Old Mahabalipuram Road or the IT corridor to the south of Chennai. Now formally known as the Rajiv Gandhi Salai, it has been the centre of attraction for developers and buyers when at peak pricing in 2007 or the steep decline a couple of years later.  

Now it has come a full circle. The market is on an upswing and has hit new highs, say developers.  

Prices swing up  

The 40 km of road running south, beginning from Madhya Kailash in Adyar, saw soaring prices as the country’s leading builders, including Hiranandani, DLF, Mantri, Puravankara and L&T, launched projects a few years ago. But then came the dip in 2008-end that saw prices and demand take a beating. A classic case being that of DLF which launched a township project about 20 km down the OMR with units priced at Rs 2,700 a sq.ft in December 2007, which was then considered aggressive pricing, hiked it to Rs 3,200 in a few months, only to slash it below launch prices in 2008-end. But that is a distant memory.  

New projects at higher price points are fast being announced and as rapidly sold. Compared with the earlier highs, the difference now is that more local players are venturing into the market but stick close to Chennai. These are premium projects by leading local brands that earlier ignored OMR as too volatile. These are leading players such as Appaswamy Real Estates and Ceebros who clearly segment the OMR market and see value in locations close to the city.  

One exception, though, is Akshaya Homes, a local player which has done a dozen projects — residential and commercial — along the OMR, beginning with Kelambakkam about 20 km down OMR. Mr T. Chitty Babu, Akshaya’s promoter, says he chose to start further from the city, well beyond 20 km from Adyar, when OMR was opening up as a market and land prices were low. Now its projects are closer to the city to take advantage of higher pricing as the market is more established.  

Thus his initial projects were priced around Rs 3,000-4,000 a sq.ft at Kelambakkam. Last year, during the low, he opted for a budget housing project at Rs 2,750 a sq.ft.  

But now, in line with the recent trends, Akshaya Homes will soon launch high-end homes of 3,000-4,000 sq.ft at Perungudi close to the city and also Kelambakkam, but the pricing is yet to be decided, he says.  

Support infrastructure  

Mr T.S.S. Krishnan, COO, Appaswamy Real Estates, while acknowledging that the OMR is back on track, points out that it should not be looked at as a single market unit. Sufficient developments in road and support infrastructure close to the city have helped attractthe interest of home buyers.  

So Perungudi and Kottivakkam, which are a few minutes drive from Adyar, are now as much in demand as any location in the heart of the city. Appaswamy Real Estates has launched a couple of projects at Kottivakkam. The price range is between Rs 60 lakh and Rs 1 crore at about Rs 5,000 a sq.ft. One project with 130 apartments is fully sold and in the other with 70 units, a joint development, the company has sold off its share of units, he said.  

Another premium builder, Ceebros with its first project on the OMR at Thoraipakkam, has over 350 apartments coming up for delivery in end-2011. An apartment of about Rs 1,200-1,600 sq.ft costs about Rs 4,750 a sq.ft. Mr Subba Reddy, Managing Director, Ceebros Property Development, says the location is the key to the success of the project.  

Mr R.V. Shekar, Managing Director, Lancor Holdings, says the demand and pricing of residential units in its Central Park South project at Sholinganallur are at levels seen in the peak seasons of 2007. Pricing here is around Rs 3,975 a sq.ft in the third phase of development. The cost of ownership of a 1,650-sq.ft apartment is over Rs 70 lakh. Except for about a dozen residential units the project has been fully sold.  

Lancor plans to launch the next phase of over 200 apartments soon. “It is the road of the future,” he says. The large concentration of IT companies will attract the workforce that will need residential space.  

The difference then and now is that the OMR has better facilities now. Whether for education, healthcare or entertainment, facilities are now available.  

Mr Mehul Doshi, of Doshi Housing, which has positioned itself in the mid-income segment, in the suburbs of Chennai, says  

Doshi Housing is set to launch a project on the OMR at Karapakkam just ahead of Sholinganallur. The 11-acre project to be launched early next year will have over 1,200 apartments. There is a concern on oversupply along the OMR but projects close to Chennai see no cause for concern, he says. That would apply to localities up to Siruseri, 20 km south of Chennai, he says confidently.  

Depending on the projects the market will support a pricing of around Rs 3,500-5,000 a sq.ft, he says. Doshi’s own project planned at Karapakkam is likely to be priced around Rs 3,750-4,000 though the final decision will be only at the time of launch. Hindu Business Line, 29 August 2010

GST Road vs. OMR

   

The two roads that are most talked about by developers and investors alike seem to be GST Road and Old Mahabalipuram Road. What if you pit them against each other KALPANA MURTHY provides a general perspective on what to expect from both roads.   

The two roads that have gained prominence over the previous few years for the real estate investors and end-users in Chennai are, without doubt, GST Road (NH45) and Rajiv Gandhi Salai (OMR). The locations saw a spurt in activity once corporate tenants began to show interest in the available commercial properties. From there, both these roads have, over the past few years, seen significant construction and infrastructural activity and now have multiple residential apartments in various stages of development ; some are currently offered for possession too. Both these corridors were touted as the future growth corridors of Chennai and saw the rise of large developments although both of them have their unique characteristics and growth factors .
   

A comparison of the two roads indicates significant commercial development. Rajiv Gandhi Salai (OMR) is the IT corridor, what with its significant supply of IT. Major IT/ ITES companies have their presence on this stretch, which is expected to cater specifically to the IT segments needs. GST Road, on the other hand, has SEZ developments such as Mahindra, L&T , Shriram, etc, along with multiple industrial units being set up in the vicinity. This consequently allows for mixed developments to be witnessed along the stretch which caters to a larger strata of society . Presently, Rajiv Gandhi Salai is faced with an oversupply situation with vacancy levels greater than 45% while GST doesnt suffer from that problem.
   

Physical infrastructure is strong in both the locations with the recent upgradation of roads, although connectivity in GST is stronger owing to the Southern Railway line and its proximity to the airport. As State-run buses use the East Coast Road instead of Rajiv Gandhi Salai, lack of public transport continues to plague most stretches of the latter. GST Road also boasts of stronger social infrastructure such as schools, higher education institutions, retail space, hospitals , etc, in comparison with Rajiv Gandhi Salai. However, social infrastructure in Rajiv Gandhi Salai is presently being established and as time progresses, is expected to strengthen further with more schools, hospitals, entertainment and retail centres. Both locations over the long term have the capability to be self-sustaining micro markets in Chennai, although the pace of the growth may vary.
   

Further infrastructural developments can be expected on Rajiv Gandhi Salai with Phase I – Madhya kailash junction to Siruseri being completed in the first half of 2010, and Phase II – Siruseri and Mahabalipuram, expected to begin in 2011. With the recent completion of the fourlane GST Road, additional infrastructure (such as rail and road over-bridges ) is expected in the near future. 
In the present scenario, GST has an advantage as compared to Rajiv Gandhi Salai in terms of wholistic sustainable growth coupled with the presence of manufacturing and IT companies. Further, the development in this region is more spread out as compared to Rajiv Gandhi Salai as the latter is developed only on either side on the corridor. That said, Rajiv Gandhi Salai has the potential to develop and may emerge as a hotspot , depending on the pace of infrastructure developments in the region.

Where should you invest ?
As they say, it always pays to do your homework before investing. Here are a few details about both destinations that will go a long way in helping you make the right decision … 

Proximity to Educational Institutions  

GST Road – The location enjoys great proximity to schools, hotels and other facilities, what with schools like Vidya Mandir and Mahindra World School being set up here.
  

Rajiv Gandhi Salai – One of the most significant problems of this stretch, in comparison with GST Road, is its infrastructural development . The Expressway has been under construction for the past seven years, without seeing much progress. However, the stretch has a few educational institutions like the PSBB Millennium school and EuroKids. 

 Rental values for a 1,000 sqft apartment  

 GST Road – As can be seen in the tabulated column, one can expect to receive a rent anywhere between Rs6,500 to Rs10,000 for low-end apartments; Rs12,000 to Rs20,000 for middle-end apartments and Rs18,000 to Rs35,000 for luxury apartments. The hiked rentals result in the good connectivity of this road to the city, thanks to the suburban trains. Its proximity to the airport also plays a huge part in the spiked rental value of apartments here.
  

Rajiv Gandhi Salai – Quality amenities in apartments play a pivotal role in perking up the rentals in this stretch. Often, the location of the apartment and its proximity to the city are factors that decide the value of the rent. Residents of this stretch are mostly BPO (Business Process Outsourcing) employees, essentially bachelors and spinsters on a transferable job. Students from across the country studying in colleges along this stretch also hold a share of the resident profile as do corporate guests. The lack of public transport on this stretch is also a major cause of worry for potential investors who wish to rent out their apartments. It is all these factors that reduce the rental value of an apartment on this stretch, in comparison with that on GST Road.  

  

Property Time, 13th February, 2010