Poor demand from expats and a general decline in real estate demand resulting from the COVID-19 outbreak have affected the market for the city's posh villas, most notably along the East Coast Road (ECR).
People invested in the villa mainly to cater to expats working in multinational companies in and around Chennai. As most expats have either left the country or moved to core areas of the city, the badge owners are now struggling to find tenants. As a result, a good number of villas are empty.
This has forced real estate developers to stop new projects as buyers have also become a difficult task. Most of the buyers were NRIs, Realtors.
The premium villa segment, which reached great heights in 2012, is losing its luster without any allowances being cut by expats and companies. According to estimates by real estate agents dealing with rentals for foreigners, the population that comes with ECR has fallen from 2,500 to 500 in four years.
Currently, about 60% of the 3,000 villas between Nilkarai and Uthandi on the ECR are vacant. The rent for properties with elaborate lawns and swimming pools previously ranged from Rs 1.2 lakh to Rs 2.5 lakh per month. Although some inquiries are being made about the demand from the residents of the city to relocate these posh properties, the deals are yet to take place as people are not ready to take up houses for such high rents. Owners do not want to reduce rent because the returns do not justify the investment they make and prefer to deal with a company as it did with expats rather than individuals.
In addition, many landlords prefer expats because there is no risk in vacating tenants and uninterrupted rents.
Mohan Kartha, a real estate agent who has been working with Accent Rentals for a decade, said that the villa market has now become a tenant market. Now, they are ready to revise their rent by 50%, but cannot find expats. Foreigners visiting the city earlier this year are being accommodated in a cheap rented apartment in core Chennai.
Srinivas Anikipatti, Senior Director - Tamil Nadu and Kerala, Knight Frank India said that the current status of ECR has prevented a major developer from starting a villa project of 400 plots at Kovalam.