Chennai, March, 20, 2018
- The Tamil Nadu budget speech essentially underlined that the state’s economy is slowly picking up with reference to increase in Gross State Domestic Product (GSDP) growth rate in real terms, from 4.85% in 2012-2013 to 8.03%, expected in 2017-2018, regardless of temporary challenges faced by the state. Numerous challenges in terms of attracting investments, job creation, skill development, farm productivity and farmer’s income, urban development, housing to the poor, natural resource management, poverty eradication, quality education, etc. are likely to hinder the path of economic growth in Tamil Nadu. However, the state government claims a favorable economic outlook to surpass 9% GSDP in 2018-2019 by means of sustained investments made in primary and industrial sectors.
“Though the Budget seems to have limited direct impact on real estate in the short term, proposed measures will boost the economic status of the state, if implemented as scheduled. In addition, if the state can establish political stability, it will make Tamil Nadu a lot more attractive from an investment perspective and better poised vis-à-vis the competing and fast developing states like Telangana, Karnataka and Maharashtra”, says Shaju Thomas, Director, Office Services (Chennai) at Colliers International India.
In order to address the challenges in basic infrastructure such as roads, drinking water supply and sewage facilities in the extended areas of the Chennai Corporation, the government has planned to re-launch the ‘Chennai Mega City Development Mission’ for which INR 500 crore has been allotted in the Budget. However, the project has already faced various challenges during its earlier implementation phase due to lack of planning, monitoring and execution of works in laying storm water drains. As per Colliers International, the government should set clear objectives, involve skilled teams and take proactive actions during implementation of the project.
While Pallavaram Thoraipakkam Road (PTR) is expected to be the next growth center of south Chennai, with 6.65 million sq ft of Grade A office supply under various stages of construction, the deteriorating marshlands remained a major concern to the residents, occupiers and environmentalist in recent times. In this situation, the state government’s initiative for eco-restoration of 695 hectares of Pallikaranai marshlands over five years at a project cost of INR165.68 crores are likely to give a facelift to this emerging corridor. As these marshlands have historically been the natural water-holding zone, Colliers expects restoration of this zone will highly reduce flooding in south micromarkets, comprising the surrounding areas such as Perumbakkam, Kovilambakkam, Thoraipakkam, Madipakkam, Velacherry, etc.
As mitigation of the impact of floods in Chennai and its suburban region is the need of the hour post the 2015 floods in the city, a comprehensive flood management plan for North Chennai and South Chennai has been prepared at an estimate of INR 2,055.67 crores and INR 1,243.15 crores, respectively, and is submitted to the Central Government for support. As per Colliers Research, timely processing and implementation of flood management plan will notably recover the investments in Chennai as most of the occupiers and investors were restraining themselves from the city. Flooding in key micromarkets such as OMR pre-toll, OMR post-toll, and MPH Road have been considered a major challenge for the stakeholders in the past few years.
Metro rail phase II, covering a total distance of 107.55 km has been proposed to the Central government for its approval and for posing the same to Japan International Cooperation Agency (JICA) for funding. A sum of INR 750 crores has been allotted as share capital assistance for the project. In our opinion, the government should also take cautionary measures to avoid bottlenecks due to congestions during the implementation phase as the project plans include key locations such as Chetpet, Nungambakkam, Adyar, East Coast Road, Shollinganallur, Medavakkam, Kovilambakkam, Ramapuram, Perambur, etc. Moreover, the centre’s approval on the revised Detailed Project Report (DPR) for the Chennai Peripheral Ring Road project estimated for INR 12,301 crores for funding from JICA, works for section-I of the proposed Chennai Peripheral Ring Road (Northern Port Access Road from Ennore Port to Thatchur on NH-5) has been announced and will commence shortly. As these projects involve long term implementation processes, we do not expect any immediate impact on the commercial and industrial micromarkets, however, these initiatives should increase investors’ focus towards the peripheral locations in the long term.
It was also announced that an Aero Space Park at Vallam Vadagal in Kanchipuram, Medi Park at Chengalpet and a Plastic Industrial Park at Ponneri are to be developed with a view to promote industrial investments. The state government also has proposed to conduct the second Global Investors Meet (GIM) on January 23 and 24, 2019. The meet will be focused on increasing investment inflows, employment growth and balanced regional development in Tamil Nadu. However, we do not see much enthusiasm among the stakeholders with the announcement of these projects due to delays in earlier announcements in such initiatives. In our opinion, a concrete action plan, well-set timelines, proper implementation and monitoring of quality of works should be the government’s focus in order to improve infrastructure, boost developments, create positive sentiment among investors and reinforce developers’ interest in the commercial and industrial micromarkets across the city and its peripherals.
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