Chennai real estate market struggles to keep nose above water

Are families in Chennai suburbs affected by floods, caused by cyclonic storm Michaung, looking to sell their houses and move to other areas that are relatively safer during monsoon rains? Will there be a panic selling of houses in areas such as Velachery Pallikaranai, Perungudi, and Perumbakkam?

It is still early days, but a dipstick survey of the Chennai real estate industry by businessline reveals that, after the second hit in 8 years, many home owners are considering selling off.

“I would have, if I could have,” says B S Sathyamurthy, who owns a flat in Pallikaranai, taking a line from the movie The Departed. Sathyamurthy (who doesn’t live there) has seen a steep fall in the price of his 2-bedroom apartment. He is hesitant to sell his flat at such low prices, hoping that things will improve.

“There is a big hospital, three schools and several IT Parks near my flat, but still there are no buyers,” he told businessline, adding that even the enquiries were from brokers. It is learnt that a 2 BHK flat goes for Rs 35 lakh, far lesser than a decade ago.

As unprecedented rains pounded the city, Chennai and suburbs were under several feet deep water for a couple of days and the suburbs were the worst affected with water not receding even after 3-4 days. The visuals on rescue operations in places like Velachery Pallikaranai, Perungudi, and Perumbakkam gave a glimpse of catastrophe. The people were seen fuming over the lack of stormwater drains and other amenities for several years. Several hundreds of families living along the IT corridor of Chennai had to move to hotels or relatives’ homes as most of the areas were inundated.

Another flat owner in Pallikaranai said that flooding in that area happens every year–only this time the situation is graver.

Taking a slightly different view, realty industry representatives say there would be only a small impact on home sales in select pockets including the above areas over the short term.

Social media platforms were abuzz with posts accusing the authorities and builders of causing such miseries for home buyers in several locations.

Panic selling

However, this is unlikely to result in panic selling of houses in those affected areas. “There will be a panic mood among the people for some time. But, they are unlikely to sell their property unless there is a compelling reason to do so. Because, purchasing a house is very emotional for people in Chennai and they may not sell it just like that. Even if the sale happens, it will be only in certain pockets,” said Sivagurunathan, President, CREDAI (The Confederation of Real Estate Developers’ Associations of India) Chennai.

While it is a bit early to say how many homes in the affected areas have come up for sale, the key sellers are likely to be Non-Resident Indians (NRIs), who have bought houses in those locations and have their parents or relatives residing there, and would have suffered during the flooding.

An NRI Lakshmi, a resident of Dallas in the US, owns a flat in Pallikaranai where her in-laws are residing. However, she is in no hurry to sell it now, as it will become a distress sale, but will do it later.

“Many homes in places like Velachery, Sholinganallur, Perumbakkam, and Pallikaranai affected by flooding will be put on sale. However, there will not be any drastic fall in the value,” said Ashok, a broker in Besant Nagar.

According to real estate consultant, Balaji, in Triplicane, who has done a few deals in the affected areas, there will be many homes up for ‘distress’ sale. Many have lost items worth over Rs 1 lakh, and it would be difficult to repay the loan. Selling the home is the only way out, and move to a rental apartment in places where flooding did not happen.

But Sivagurunathan didn’t rule out the possibility of flood impact on the residential market. “There will be an impact, which will be minimal, on home sales in some pockets. But it will be a temporary phenomenon.”

Post-2015 flood, the sentiments were weak in the Chennai residential market and new launches were minimal. The market took some time to recover. “We can’t compare 2023 with 2015. During the 2015 floods, the entire city and suburbs were devastated. But this time, the city was relatively safe, and only some pockets were affected badly. So, the impact on housing sales will be for short term term only,” he added.

But it is an undeniable fact that in recent years most of the residential projects in suburbs have come up on flood plains, wetlands, or lake area, a realtor told businessline .(With inputs from T E Raja Simhan)

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