SEZ Property Investment Projects in Chennai

Chennai is fast becoming a sought-after destination for many IT majors. Keeping in line with this trend, many famous property developers have also moved to Chennai.

Recently, Tata Realty and Infrastructure (TRIL) and Tamil Nadu Industrial Development Corporation (TIDCO) have entered into an agreement for joint development of property in the Special Economic Zone. This will be IT specific project and will span about 25 acres in Taramani. The estimated cost of development is $ 750 or Rs. 30 billion. Under the agreement, an international convention center, a five-star hotel and service apartments will also be built attracting many to buy an investment property in Chennai. The move is expected to generate employment for over 40,000 people. This project is touted as a milestone in the development of IT-SEZs in India.

The development of the SEZ will be done in two phases. During the I phase, 2.30 million square feet will be developed. This is expected to be completed by the end of 2009. The II phase will involve the development of 1.70 million square feet and is expected to be completed by 2011.

TRIL is a new venture of Tata Sons Ltd and it has taken on the development of many projects in infrastructure development and real estate.
While this is regarding the development in SEZ at Chennai, all is not well on the Old Mahabalipuram Road (OMR) front. Around 4 million square feet was developed by the end of 2007 on OMR meant specifically for technology clusters. However, only 1.7 million square feet has been absorbed. Rentals have fallen and vacancy rate is up. About 0.50 million square feet that has been developed recently have not been occupied at all, raising serious concerns about the viability.

The problem lies with oversupply and overpricing of property. Developers have priced their projects very high at around Rs 4000 per square feet and this has killed the golden goose. The sunset clause in development of Software Technology Parks (STP) comes to an end by March 2009. So IT firms will start looking at SEZs for the future and the space so far built on OMR will remain unoccupied unless a serious correction takes place in prices.