Rental Market is key to Chennai Realty Growth
Chennai has grown exponentially in recent decades. It attracts an endless sea of people who keep moving in to the city, primarily for career and educational prospects. Employment and education opportunities and lifestyle prospects, are magnets that pull people into Chennai from all parts of the country. Impact on the demand for rental housing in the city High level of migration: The total migrants into the urban areas of Tamil Nadu, as per 2011 census, accounts to 12.3 million. Of this, around 47% have a duration of residence of up to 9 years. Thus, a fair portion of citizens in Chennai are tenants, who do not necessarily want to buy a flat to live in the city. Better quality of living: Rental housing allows residents to opt for a higher standard of living than their property purchasing power. A new apartment in the CBD of Chennai would cost around Rs 75 lakhs, while a person earning about Rs 10 lakhs per annum, can afford a home costing Rs 60 lakhs in the more affordable suburban location. However, such an individual can afford a CBD-based home on rent within the same annual income. This makes it possible for a MIG (middle-income group) individual to live in a HIG (higher-income group) flat, while the LIG (lower-income group) individuals can comfortably afford to live in a MIG flat. Increased affordability: Chennai continues to be an expensive city to buy a property. An average increase in property prices by 6%-7% from last year, has further constrained the affordability of owning a house. However, the rental trends in Chennai have seen only 2.5%-5% annual increase over the past 4-5 years. Tax benefits: Rental paid saves taxable income, as almost the whole portion of the rent paid can be saved by claiming it under Section 10 as HRA. Flexibility: Offering greater flexibility and requiring less of a financial stretch than home ownership, renting is most common among young adults, in whose lives changes in work and relationships are frequent. Lower additional costs: Owning a house involves a down payment for the loan to the tune of almost 20% of the property value and the EMI to be paid is often 40%-50% of the monthly income. Property taxes are about 1.5% of the property value and the regular maintenance and repair costs account for 40% additional charges, as compared to a simple monthly rental for the same property. However, hunting for a suitable rental house does come with its own set of challenges – not only to outsiders but also locals. Accessibility to the work place, quality of the neighbourhood, connectivity to other parts of the city, adequate living space, amenities, owners’ rulebooks and the budget and value for money being paid, play a significant role in while searching for a good rental flat. Trends in the important housing rental hotspots of Chennai IT Corridor-Old Mahabalipuram Road OMR continues to thrive as one of the preferred destination for the city’s infotech population, due to its proximity to various IT business parks and dedicated SEZs. With a slew of residential apartments and studios for singles coming up along this corridor, the burgeoning population of IT professionals has a logical influence on real estate and rental accommodations in this locality. Being majorly occupied by bachelors (sharing accommodations) as well as families of 4 to 5 members on an average, Shollinganallur, Perumbakkam, Perungudi, Siruseri and Taramani, have average residential rental values ranging from Rs 12,000-18,000 per month for 2-BHK flats and Rs 15,000-30,000 per month for 3-BHK individual houses.