Chennai has grown considerably over the past few years, and today it has surged to become one of the top realty destinations in South India, attracting investments from homebuyers, investors, and NRIs. This upbeat residential real estate scenario is primarily the result of a diverse economy driven by electronics, automobiles, and a booming IT/ITeS sector. This optimistic trend is expected to continue into 2020, although a lot of trends predicted as having an impact on the real estate sector have their root cause in 2018 and ’19.
Here are the top 6 real estate trends to watch out for in 2020:
GST’s Continued Impact on Home Buying
In the pre-GST era, a homebuyer had to pay service tax on the construction cost or VAT on under-construction properties, which varied from state to state. But when this was unified under a single tax system, the impact was closely watched by realtors and homebuyers alike, as the ultimate price of a house could vary depending on the final GST rates. With the revision and rate cuts that followed, the complete impact of GST on real estate is still unfolding.
The good news for homebuyers though is that no GST has been levied on a ready-to-move-in house. With consumers historically preferring ready-to-move-in properties over under-construction ones, this factor will escalate the demand for completed projects. In addition to this, effective from April 2019, GST rates have been slashed for regular housing projects and affordable housing projects. Developers of regular projects can charge GST at 12% with Input Tax Credit (ITC) and 5% without ITC. For affordable housing projects, they can charge 8% GST with ITC and 1% without. Since this rate cut will reduce the price gap between the under-construction properties and completed projects, there will be more demand for these properties as well. Lastly, a simplification of the home loan process and an overall decrease in the quantum of down-payments required will also encourage more people to buy homes in 2020.
Growing Consumer Confidence through RERA
In the years that preceded the implementation of RERA, the real estate market in Chennai and the country, in general, was awash with shoddy quality, unfair practices, and a general lack of oversight. No wonder that many a potential homebuyer adopted a wait-and-watch approach or put off buying a home entirely, preferring instead to rent.
With the implementation of RERA in 2016, a lot of this consumer scepticism slowly started to dissipate, and this trend is slated to only grow in 2020. People who were looking to buy, but held back due to mistrust of realtors, are now looking for RERA certified builders so that they can finally invest their capital into a home. More importantly, this trend has trickled down to the real estate agent level with a record number of agents registering with RERA (or its state-level counterpart TNRERA) in 2019 when compared to the previous year.
From dispute resolution to transparency and transaction regulations, 2020 will be a year that will transform Chennai real estate.
Impact of Property Tax
For a potential homebuyer, even the slightest change in the market, like a tax revision or the construction of a new IT park, will have a significant impact on the buying or selling decision. As a result, homebuyers tend to keep abreast of various topics related to real estate be it developments on paying property tax in Chennai or maintaining a property post purchase.
For example, when Chennai’s property tax, which was last revised in 1998, was revised in April 2018 with an exorbitant hike, it attracted massive opposition and complaints from various residential welfare organisations. Though the decision to raise rates was purely financial, the government could not ignore the massive opposition to the revision. Ultimately, the state government withheld on implementing the revised tax rate until a committee reexamined the details and recommended a course of action. As this decision is still pending, it will be a significant factor that will either boost or plummet residential purchase in Chennai in 2020.
Gated Community Flats
Gated community flats are the next big thing that will make waves in 2020. With the high sense of security, amenities, and communal value these properties provide, gated community flats tower above other types of properties. Gated community flats typically contain a miniature town behind closed gates with shopping areas, hospitals, temples, schools, and so on, making them self sufficient. However, the requirement of massive swathes of land to build these properties have pushed realtors to look for land elsewhere i.e. the suburbs. We can already see this trend manifesting itself through the development of multiple properties along OMR such as those in Navallur, Sholinganallur, Kelambakkam, Siruseri and Thoraipakkam.
The Growth of the Suburban Real Estate Market
More and more people shifting to the suburbs will be a massive trend to expect in Chennai next year. Chennai’s suburbs are no longer isolated and devoid of opportunities. With the IT/ITeS sector boom, IT companies expanded to the suburbs due to a lack of space within the city. Now, the suburbs are dotted with IT parks and multinational companies that provide a multitude of employment opportunities to its population. This has created a considerable demand for residential properties in these suburbs triggered by the needs of the people who work in these companies.
Connectivity between these suburbs and other parts of the city has also increased. The upcoming construction of metro rail phase II and elevated corridor will improve the city’s infrastructure and connectivity in the suburbs like Sholinganallur, Siruseri, Taramani, and Perungudi. In the past, when these areas were devoid of any connectivity with the city, the IT workers preferred commuting to the office to living near their workplaces. When these projects come to fruition, the increased connectivity will encourage people who have been hitherto deferring a home buying decision. Hence, the demand for houses in the suburbs will rise significantly.
A Rise in Demand for Rental Market
The next huge growth momentum is forecast to come from increased employment opportunities in the city. As a result of the booming IT/ITeS sector, Chennai witnesses a growing influx of working population from all parts of the country. Most of this segment that works in the corporate sector prefer renting a home near their offices to buying a house owing to high property prices. Similarly, they might put off the decision of buying a house until they see themselves working in the city for a long time leading to a considerable drive in the rental market. The demand for the rental market will be boosted further by the student population who migrate to the city to study in one of the top colleges in India.
Overall, the future of Chennai residential market looks favourable for homebuyers. With promising trends, homebuyers will be instilled with confidence and hope to embrace the future the city holds.