Like the rest of the world, the real estate market in Chennai has been through one of the worst years in recent times. With the year 2009 behind, there is optimism amongst developers that 2010 would be better.

Last year Chennai did not suffer too much in comparison to other major markets where there had been an extreme run up in prices. Today, although a few developers have started to raise capital and to look for investment opportunities, many others continue to lower debt and sell non-core assets.

Due to the times, there is an unprecedented avoidance of risk among banks. Lenders will force distressed owners to become motivated sellers.

Most banks want to do business only with proven developers with whom they already have a relationship. However, this year, property financing is expected to get more aggressive and more debt capital will flow.

When the uncertainty fades, we are likely to see a significant upturn in apartment transactions. Very little sales will happen for office space in the next few quarters, as financing has been hard to secure for buyers.

Recovery may be slower than expected with investments in business operations and new hiring getting delayed. New buildings coming on line over the next three to four quarters will face higher initial vacancy levels which will increase the pressure on owners of existing buildings to support current rent and occupancy levels.

Despite seeing the first green shoots of recovery in select micro markets, in an uncertain environment, developers should intensely stay focused on maintaining stable cash flows, looking for every opportunity to cut costs and increasing efforts to maintain good relationships with investors and lenders.

However, one thing is for sure that the size of the decline if any, moving forward is going to be smaller than what was seen in 2009. Developers should realize that although the worst may be over, every sale is tough and recovery could be slower than expected. In today’s market there are a large number of proposed affordable housing projects, however the demand for affordable housing is not unlimited.

With many developers proposing affordable housing projects, developers need to realize that the demand for affordable housing is limited. More developers are expected to go green as cutting energy expenses is likely to be a priority from end users.

In the land market, the coming year should be more active as the gap between buyers and sellers gradually narrows, with sellers making up most of that difference and more landlords being open to joint developments. In the retail real estate sector, the owners and tenants need to have a shared vision of success if retail real estate is to thrive in the years ahead.

Some micro markets are bound to fare better than others. Market selection for potential apartment buyers is very important at this point in time because there are some markets that are very clearly going to slow down going forward over the next couple of years given the over supply.

Signs of an economic rebound are beginning to show, although the question of whether it will be a strong, average or weak recovery remains. The other big question is whether this is a temporary improvement, or whether the market is finally bottoming out and a revival is on the way.

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