Long before the establishment of the British East India Company in the 17th century, the southern coastal city of Chennai played a significant role in India’s vast history. At different times the seat of power for various empires, a military stronghold and a trading port, Chennai’s influence has never really waned.
The capital of Tamil Nadu (once part of Madras) is now the cultural, economic and political heart of the state with a robust economy rooted in automobile manufacturing, IT, healthcare and education. But the city is perhaps best known as being one of the world’s business process outsourcing hotspots (along with Bangalore) — and as the home of Tamil cinema.
The nearly five million residents that live on the Bay of Bengal also take advantage of a wealth of green space and beaches and a relatively outdoorsy lifestyle. The UNESCO site at Mahabalipuram is just about 60 kilometres south of Chennai, making the city on of India’s most popular tourist destinations (approximately one million in 2011) after only Mumbai and New Delhi. And the city boasts a well-educated workforce with which to staff its multiple Fortune 500 corporations.
Chennai is one of the world’s fastest growing cities and is headquarters to over 20 of India’s own conglomerates. Dubbed the Detroit of India, the auto sector alone boasts plants for Hyundai, Renault, Nissan, Daimler AG, Caterpillar, Ford, BMW and Mitsubishi among others, accounting for 30 percent of the industry there. Most major international banks have a presence in Chennai (HSBC, RBS, Goldman Sachs, Credit Suisse, Standard Chartered), as do prominent communications and electronics firms (Siemens, Motorola, Ericsson, Foxconn), which accounts for 45 percent of the country’s total electronics exports. So why doesn’t the city get the respect it deserves?
Maybe it does. The city is in the midst of several infrastructure upgrades, perhaps with an eye to future growth. Tunnelling has commenced on a monorail and the Chennai Metrorail is progressing on schedule, and France’s Alstom Transport manufacturing facility in the city will have rail cars ready for delivery in 2014. Office and retail leasing are stable, but it’s the residential market that has shown the most room to move.
Residential prices in Chennai are on the rise and have been for several years, despite downturns in other major cities. That could be credited to the end-user nature of the market, one that investors get involved with for the long-term and thereby mitigate the instability seen in speculative markets. A second quarter report by Knight Frank stated, “[To] July 2012 Chennai has witnessed new property launches of approximately14,900 units, which are scheduled to be completed in the next 2 to 3 years. This optimism shown by developers may be due to the fact that the Chennai market is primarily self-sustained and not much affected by the upheaval in global markets.”
According to Jones Lang LaSalle’s Real Estate Compass, Chennai is leapfrogging regional rival Bangalore in terms of buoyancy. Bangalore is more mature, but Chennai is rising fast. “Capital and rental values in city-centric locations are on the higher side in Chennai when compared to those of Bangalore. This is primarily because of the limited supply of city-based residential properties and lack of social infrastructure in Chennai’s suburbs. This has caused an escalation in demand for purchase and rental apartments in the city-centric locations,” JLL’s managing director for Chennai and Coimbatore, Badal Yagnik stated in November’s report. As is stands right now, that oldest of real estate tenets drives Chennai’s market: location, location, location. Prime locations include Adyar, Anna Nagar, Sholinganallur and Medavakkam, where rents range between INR9,000 per month up to 30,000 (HK$1,300 to $4,200) for a 1,000 square foot flat. That’s firmly in the realm of fantasy for most Hongkongers, but represents an 11 percent increase in 2012’s first quarter for Chennai — and over 200 percent between 2007 and 2012. Developers are of the mind that it’s a price correction that was inevitable; Chennai had to catch up to Mumbai and Bangalore eventually. “Prices of construction materials, labour and fuel have gone up. All these factors have added to the price of a residential property. With prices set to rise further, this seems to be the right time to invest in a property,” Devesh Bhuva of Prince Foundations told Indian Real Estate Market in July. As the fourth largest city in a BRIC giant, and the one that economic pundits believe is most likely to rival China in the future, Chennai appears positioned as one of Asia’s best-kept property secrets.