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An interesting trend in Chennai’s real estate industry reveals that developers are coming up with housing estates on plots that were originally earmarked to be IT parks. Over the last one year, the demand for residential homes in the city has significantly increased. At the same time, the city has witnessed excess inventory of commercial or office space. In order to strike an optimal balance, the leading developers have decided to come up with residential properties in places where IT parks were expected to come up.
Chennai already has a few IT parks that come with housing facilities. These projects were developed before the pandemic struck. Such estates came up on GST Road and OMR a few years back. However, the city presently has an excess inventory of commercial projects. This explains why the developers with IT projects in their pipelines are holding these ventures. Statistics reveal that the use of commercial space dropped in 2020, as compared to 2019. In 2019, the city witnessed the absorption of 5.2 million sq. ft. of office space use. However, the figure dropped to 4.5 million sq. ft. in 2020. Besides, stakeholders believe that this absorption would further drop to 2 million sq. ft. in 2021, as a significant portion of employees are working from home.
Initially, it was expected that the market would revive after a couple of years. However, the fear of a third wave of Covid-19 has put a dampener on such hopes. Considering these trying times, reputed real estate developers are coming up with residential projects in places where they were supposed to build IT parks or commercial projects. One of the developers stated that a residential estate with 200 units would be a better option than to develop an IT park cum mall estate. Considering the market conditions, the developers are also redesigning their respective business models. Some of these changes were not part of the original development plans.
Most of the developers acknowledge that residential projects would be more lucrative at this point of time. The demand for apartments in Chennai has remained stable, while the developers have realized the drop in demand for commercial spaces. For office spaces, the vacancy rate increased to 11% from 7% over the last few years. Therefore, it would be logical for developers to focus more on residential projects.
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