In a year marred by pandemic and lockdown, Chennai has shown resilience in the performances of both office and residential asset classes during the year 2021. In their latest report, Knight Frank India noted that Chennai’s residential market witnessed a steady recovery with sales rising by 38% year on year (YoY) to be recorded at 11,958 housing units. New launches recorded a significant rise of 77% YoY with the addition of 12,783 units in 2021.The total office transactions for the calendar year 2021 stood at 3.9 mn sq ft. New completions in 2021 for office space was recorded at 1.8 mn sq ft. 

Knight Frank India today launched the 16^th edition of its flagship half-yearly report – India Real Estate: H2 2021 – which presents a comprehensive analysis of the residential and office market performance across eight major cities for the July-December 2021 (H2 2021) period. The report highlights that Chennai witnessed sales of 6,206 housing units in H2 2021, a 9% growth in YoY terms. Sales were concentrated in the south and west micro-markets, together accounting for 91% of the total sales during the period.

In H2 2021, the share of projects with ticket sizes of > INR 10 million increased to 23% of the total sales from 18% in H2 2020. Conversely, the city witnessed a gradual decline in the share of sales of ticket sizes < INR 5 mn from 54% in H1 2018 to 33% in H2 2021.

In the office performance, the Chennai office market has recovered well from the second wave in H1 2021 with transaction volumes in H2 2021 bouncing back 123% since then. Similarly, the average transaction size has also risen 81% during the same period.

The manufacturing sector was the most active during H2 2021 accounting for 1.1 mn sq ft or 44% of the total area transacted during the period. The Information Technology sector accounted for 0.5 mn sq ft or 20% of the space transacted during H2 2021 compared to 64% in H2 2020.

RESIDENTIAL MARKET UPDATE: H2 2021 (JULY – DECEMBER 2021) 

CHENNAI RESIDENTIAL MARKET SUMMARY

Parameter	2021	2021 Change (YoY)	H2 2021	H2 2021 Change (YoY)
Launches (housing units)	12,783	77%	7,360	98%
Sales (housing units)	11,958	38%	6,206	9%
Average Price in INR/sq m (INR/ sq ft)	INR 43,594 (INR 4,050)	6.7%	–	–

Note: 1 square metre (sq m) = 10.764 square feet (sq ft)

Source: Knight Frank Research

• The Chennai residential market has been on a steady path to recovery with sales momentum gradually increasing since H2 2020 to culminate into 6,206 units in H2 2021, a 9% growth in YoY terms. 

• 7,360 units were launched in H2 2021 which translates to a 98% YoY growth in supply levels, as developers gauged the changing mood of the market.

 • Sales were concentrated in the south and west micro-markets, and together accounted for 91% of the total sales during the period. The south locations along the OMR and GST roads continue to garner most homebuyer interest at 51% while the more affordable locations such as Porur, Valasaravakkam and Poonamalle toward the west accounted for 34%.

 • In H2 2021, the share of projects with ticket sizes of > INR 10 million increased to 23% of the total sales from 18% in H2 2020.

 • While the growth in sales has been encouraging in H2 2021, this has also been accompanied by price growth of 7% YoY. 

• Residential demand is largely focused on the ready-to-move-in properties and has caused the average age of inventory in Chennai to reduce to 14.3 quarters in H2 2021 compared to 15.5 quarters in the year ago period.

Source: Knight Frank Research

Srinivas Anikipatti, Senior Director– Tamil Nadu & Kerala at Knight Frank India said, “The pandemic infused need for upgrading the family’s primary residence and to accommodate work and study from home requirements has encouraged home sales in the mid and higher-priced ticket size segment. The fast-improving sentiments and recent price recovery are encouraging indicators and we expect market volumes to pick-up in the near to medium term.”

Ticket size split comparison of sales during H2 2020 and H2 2021

Source: Knight Frank Research

COMMERCIAL MARKET UPDATE: H2 2021 (JULY – DECEMBER 2021)

 • The Chennai office market has recovered well from the second wave in H1 2021 with transaction volumes in H2 2021 bouncing back 123% since then. Similarly, the average transactions’ size also rose 81% during the same reference period.

• The 0.16 mn sq m (1.8 mn sq ft) of office spaces delivered in 2021 were 47% lower YoY. Gateway Office Parks and Urban Square delivered on the Old Mahabalipuram Road (OMR) constituted 65% of the 0.09 mn sq m (0.9 mn sq ft) space completed during H2 2021. They were also two of the largest projects delivered during the period.

• The manufacturing sector was the most active during H2 2021 accounting for 0.10 mn sq m (1.1 mn sq ft) or 44% of the total area transacted during the period. 

• The Information Technology sector accounted for 0.05 mnsq m (0.5 mn sq ft) or 20% of the space transacted during H2 2021 compared to 64% in H2 2020.

 • The increasing need for flexibility has boosted demand for managed office spaces over the course of 2021. While the IT sector deferred its leasing activity, it was the primary driver for the rise in the co-working/ managed office sector’s transactions during the year. The 0.03 mn sq m (0.30 mn sq ft) taken up by the sector during H2 2021 translates to a share of 11%, the highest since H1 2019. 

• 36% of the space transacted in H2 2021 took place in the SBD OMR at locations such as Perungudi, Kandanchavadiand Taramani. RMZ Millenia and Varalakshmi Tech Park accounted for 65% of the transactions in the SBD OMR due to two leases signed by Trimble and Saipem during H2 2021. The SBD ranked close behind the SBD OMR in terms of share of transactions, at 33%. 58% of the transactions in the SBD occurred in Guindy and Manapakkam. 

CHENNAI OFFICE MARKET SUMMARY

Parameter	2021	2021 Change (YoY)	H2 2021	H2 2021 Change (YoY)
Completions in mn sq. m (mn sq ft)	0.16 (1.8)	-47%	0.09 (0.9)	1,359%
Transactions in mn sq. m (mn sq ft)	0.40 (3.9)	-14%	0.25 (2.7)	-15%
Average transacted rent in INR/sq. m/month(INR/sq ft/month)	627 (58.3)	-2.7%

Note: 1. 1 square metre (sq m) = 10.764 square feet (sqft)

Source: Knight Frank ResearchSector-wise transactions split in H2 2020 and H2 2021

Srinivas Anikipatti, Senior Director– Tamil Nadu & Kerala at Knight Frank India said, “Even though the transaction levels have remained subdued during the year, the market has observed an uptake in leasing activity in the second half of the year. Price value have also stabilised in the 6-month period. 

There are early signs of recovery and the market is expected to see an upward curve in the office transaction volumes in the medium to long term.”