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Tuesday, 20 May 2014

CHENNAI: Strong English speaking skills and a wide mix of industries that promotes cross pollination of work culture has made Chennai one of the top 12 cities in the world for real estate investments. This is the first global recognition the city has received; it is also the lone Indian city on the list.

The Candy GPS Report, published on Friday, identifies 12 cities around the globe with the potential to show strong residential property price growth in the next few years. The report — produced by Candy & Candy, Savills World Research and Deutsche Asset & Wealth Management — said, "Prices in these rising cities are generally much lower than in the world cities, which make them more accessible and attractive to yield seeking real estate investors." The list ranges from well established cities such as Melbourne, Australia, to centres in developing economies such as Jakarta and Chennai, that have a high number of ultra-high-net-worth residents, it said.

"While all of us acknowledge Chennai as an English speaking work zone, it is also a traditional banking domain speciality location driving inbound BFSI (banking financial services and insurance) businesses, which is a key differentiator to Bangalore and Hyderabad. Apart from these, Chennai has tremendous strengths in high quality healthcare and education systems, a key ingredient for future growth," S Ramaswamy, chief consultant RECS Group, a real estate consultancy said.

Yolande Barnes, Director, Savills World Research, who conducted the analysis said: "As prime real estate in many premier cities has become more fully valued, emboldened investors are now spreading their wings and looking for high yielding secondary properties in those cities and (properties) in second-tier cities in countries with strengthening economies."

For example, a two bedroom apartment in prime selling areas is priced at $1.60 lakh or Rs 96 lakh and in secondary ones they sell at $40,000 or nearly Rs 24 lakh."This more adventurous approach is likely to not only provide higher income returns but also an opportunity for significant capital growth. Real estate values will grow as new cities all over the globe rise on fortune's wheel. Property rents and values will rise in line with new and growing economic strength," the report said.

Real estate developers in Chennai offer around 20% internal rate of return or IRR for equity investments in residential projects. While, commercial properties yield about 8-10% rental returns. Residential rental returns are 3 to 5% in the city.

"Chennai is typically an end user market which has a great mix of businesses. Its top tier medical facilities add zing to the city as an investment destination. More importantly, it is not seen as a luxury market like Mumbai, which means there exists tremendous scope for improvement of city skyline," S Neelakantan, senior partner, CNGSN, a firm which has actively structured real estate investments said.

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