Despite a huge demand for residential flats in Chennai ,sales are steadily dipping due to high prices. Middle-class families, who form the bulk of the buyers, have few choices. Going by present market rates, most people in the salaried bracket may not be able to buy a flat anywhere within a 30-km radius of the city centre.
In most parts of Chennai, apartments in new complexes cost between Rs 70 lakh to Rs 1 crore. As for adjoining suburbs, prices are in the range of Rs 40 lakh to Rs 50 lakh. For instance, ongoing projects on the Madurai Highway are priced at Rs 45 lakh and above. On the IT Highway, it is still higher with flats priced around Rs 1 crore. Further, since builders have pegged minimum floor space at 1,400-1,500 square feet per flat, the overall cost has risen considerably even in places where land prices are low. Only businessmen and traders can afford such high prices.
To buy a flat worth Rs 50 lakh, a salaried employee would have to pay Rs 7.5 lakh upfront and an EMI of Rs 50,000 to service the balance Rs 42.5 lakh home loan over the next 20 years. Going by bank eligibility norms, he or she would need a salary of Rs 1 lakh per month to obtain a loan to pay such a high EMI. Obviously, those with such high salaries are few in number and on the highest rung of the corporate ladder.
The main issue now is the builder’s reluctance to develop affordable housing stock, the preference being for premium projects which offer higher profit margins. As the effort needed for developing a low cost project is nearly the same as that for a premium block, builders opt for the latter. At the height of the boom, many made profits ranging from Rs 2,000 to Rs 4,000 per sq ft by putting up premium apartment blocks. Today, most of them are waiting in anticipation for prices to start moving up again.