BENGALURU | MUMBAI | NEW DELHI: It's still too early to count the losses from the unprecedented floods and torrential rains in Chennai that have impacted people from all walks of life, but one of the worst hit businesses clearly is real estate.
Besides wastage of hundreds of tonnes of building materials such as cement and sand at construction sites and losses due to inordinate project delays, developers are also staring at the possibility of losing their recent sales momentum.
According to real estate consultancy Jones Lang LaSalle India, the Chennai property market was demonstrating renewed interest from homebuyers who were fence sitting for over a year since September, but rains have now affected it. "Home buyers are postponing their decisions until the rain and flood situation subsides," said Sanjay Chugh, national mandated sales head and Chennai business head of JLL Residential. Chennai has been pounded by relentless north-east monsoon rains in the past few weeks, which has severely damaged the city's infrastructure, including roads and electricity lines. The Tamil Nadu government has estimated losses at nearly Rs 8,481 crore. Several have died. Developers have stopped construction work for around 2-3 weeks now and many of them will also have to work on base structures and foundations because of waterlogging.
"The losses are huge but people will have to cope with it. It will lead to lot of stress and will take time to come back," said Irfan Razack, chairman of Confederation of Real Estate Developers Associations of India (CREDAI), which has around 500 registered builders in Chennai alone. Some of the large national builders that have significant presence in Chennai include Prestige Group, Tata Housing, Shriram Properties, Godrej Properties and Sare Homes. An average of 5,000 homes were being sold in Chennai every quarter in 2015 before the rains. According to realty research firm Liases Foras, residential sales in Chennai jumped 90%, highest across India, in the second quarter of the financial year at 7.4 million sqft.
Experts attributed the improved buying sentiment to reduced new launches, interest rate reduction and rational pricing, coupled with attractive offers from developers. But now, developers that had lined up offers in anticipation of a healthy sales cycle say waterlogging and inundation of many localities such as Tambaram, Urapakkam, Mudichur, Perumbakkam, Saidapet, Siruseri, Keelakatalai, Pallaikarana and Velacherry have impacted demand.
Two large under-construction projects of Sare Homes are impacted. "At the moment we can see that water has entered the lift wells in the completed parts of the projects and could have damaged the machinery. Construction material has also been impacted and so have the water and sewage treatment plants," said Vineet Relia, managing director at the Gurgaon-based firm. "Some of our engineers and staff were stuck in the city but a few of them have managed to move to Bengaluru," he added. Murali M, managing director at Shriram Properties, said projects are expected to get delayed by 6-12 months.
"There is huge losses of building materials, it will take over a year for builders to come out of financial damages," he said. Shriram is developing one million sqft of commercial projects and 5.5 million sqft of residential projects in the city.