The Chennai real estate markets have brought forward a perfect example of how market fundamentals can control property values and developments. In the past 12 months, the residential real estate values in Chennai have not only corrected to reasonable levels but have also shown signs of fundamental strength.

Commercial properties too have defied nationwide trends of non-justified price escalations in property values and rentals, as witnessed in the office space segment at Mumbai, Delhi and Bangalore.

Emerging picture at Chennai PBD

Just like most other parts of the country, the real estate market of Peripheral Business District (PBD) of Chennai has seen a massive rise in construction activities, in the past 5-years.

Today, most of the new capacity additions in the commercial property segment in Chennai come from PBD. According to DTZ, a real estate advisory firm, reports, 92 per cent of the total office space supplies to Chennai in the second quarter of 2007 came from PBD.

The major commercial property projects basically meant for IT and ITeS industry, included 1.52 lakh sq. ft Central Square and Chennai Tech Park spread in staggering 9.8 lakh sq. ft of office space. Another giant commercial project completed in the region with ITPC that was spread in 6.70 lakh sq. ft of office space.

Perhaps, the largest commercial property project in the PBD at this moment was Menkur that covers area as large as 12-lakh square feet.

Property Values and Absorption

The absorption rates for these properties are at fair decent levels and the targeted group of IT and ITeS companies have responded well for these new additions. Sony Ericson leased 1.24 lakh of office space at DLF IT Park recently, while Indian technology giant HCL also leased 3-lakh square feet of commercial space at ETA Technology Park.

And it is not that the rental values have triggered here, after taking cue from the corporate response. At present, the same is hovering at Rs 45 per sq. ft and is expected to remain so at least for the next 3-4 quarters, market analysts say.

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