Chennai ranks Second Largest Market after the NCR in Loan Applications
In the home loan market, Mumbai has dropped to number three position and Chennai is number two. A combination of factors ranging from increase in number of nuclear families to growing job opportunities in Chennai have led to a steep demand for residential real estate.
Chennai has always been a conservative market as far as residential real estate is concerned. It has two types of consumers — first time buyers and investors (people looking for a second home). The booming job market in Chennai and suburbs has created a need for affordable housing.
Chennai has done better compared to Mumbai. The reason for that are the property prices. It is still affordable in Chennai and a good property is available in the range of Rs 5,000 to Rs.7, 000 a sq. ft. In a recent Chennai property fair, the southern region was the strongest market for LIC housing finance, with the growth led by Tamil Nadu. Loan disbursals continued to be strong in Chennai and other cities including Coimbatore, Madurai and Tirunelveli.
In the home loan market, however, the NCR has been number one followed by Mumbai. Today, Mumbai has dropped to number three position and Chennai is number two. In Mumbai, there is hardly any property available at less than Rs 10,000 a sq ft., and that too in a distant suburb.Today business in Chennai is bigger than that in Mumbai. Chennai ranks as the second largest market after the NCR in loan applications, said Deepak Parekh, Chairman of HDFC.
The need for owning a house in Chennai is also due to increase in rental values within the city. Instead of going in for rented accommodation, first time buyers prefer to buy a property with the help of a loan. As far as investors are concerned, they prefer to invest in land or a house as it fetches more or equal appreciation.
Most purchases are by middle-income borrowers and not by investors or speculators. House is a necessity for them. Interest rates will have a lesser impact on demand for loans than other factors like unstable employment and very high property values. The cost of a house as a multiple of the annual income of a borrower is currently estimated at 4.8 times. In other words, it takes about 4.8 years’ income to buy a house. As long as that ratio stays in 4.2-5.5 range, housing loan demand will be there, says Renu Sud Karnad, Managing Director, HDFC Ltd.
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