Tepid trend in luxe realty to continue for a year

Ajith Chordia, President, CREDAI TN says, “The rates in the luxury segment are flat. There is only a marginal price correction on non-applicability of GST or absorption of a portion of GST. With the luxury market in Chennai, only need-based buying is taking place. The luxury segment is stagnant, while the premium band is showing some pick up in regions like OMR.” 

Ramesh Nair, CEO and Country Head, JLL India, ascribes the impact of demonetisation and a general lack of investor activity in the luxury segment as notable developments in this space. He says, “The realignment being caused by the advent of RERA and GST have also kept buyers away in a rapidly fluid environment in the market. While these are medium-term pains, the future looks to be better aligned in terms of better industry practices and a general recovery in the buyer sentiment. There are some local issues in Chennai as well such the recent political uncertainty and the concerns due to the flood situation which need a long-term solution.” 

So, the buyer sentiments in luxury segment currently remains weak overall, with only limited interest from typical end-users, while investors have been staying away. NRIs who have also been historically linked to buying luxury properties in Chennai have also been fence-sitters in the rapidly evolving regulatory scenario. Both these factors have fuelled the current sluggishness in the luxury market in Chennai, he adds.

While newer projects seem to have an uptick, inventories of large projects are leading to price cuts in some cases. 

“The slowdown in the luxury market due to sector-specific issues as well as factors endemic to Chennai have resulted in a dynamic price environment, where developers are willing to negotiate and offer reduced prices,” says Nair. 

The declining trend that engulfed luxury home prices across key Indian metros earlier this year has intensified amid a global pattern of weakening prices revealed the Knight Frank Prime Global Cities Index Q3 2017. 

Dr Samantak Das, Chief Economist and National Director – Research, said, “Prime residential markets have been under immense pressure particularly since demonetisation. While the move had an adverse impact on the overall residential market, luxury homes sales were worst hit.” 

He adds, “Among the top three cities in India the growth in price in this genre has been slowly tapering. While Mumbai maintained positive growth, albeit at an abysmally low rate, Delhi and Bengaluru witnessed negative growth. We foresee the trend to continue for at least 8- 12 months in this end-user driven market.”