Chennai: Rental prices and security deposits for housing have shot up in Chennai and its suburbs this year because of a property tax hike, the end of widespread work-from-home arrangements and the city’s industrial growth. The Greater Chennai Corporation (GCC) Council passed a resolution on 27 September allowing the civic body to increase property tax rates by 6 percent annually. The tax hike came into effect on 1 October 2024.
Property consultants say demand for rental housing and rents have surged particularly in areas with recreational facilities as working professionals want to live closer to neighbourhoods with entertainment and leisure activities. “Earlier, wherever people stayed, irrespective of where they lived, the amenities they got around their residential area were more or less the same,” said R. Kannan, a property consultant in Ashok Nagar locality.
“But after the industrial growth, people don’t get late-night food courts in peripheral areas, where there won’t be any shops after 11 or to the maximum of 12. But it is not the case in Ashok Nagar or the places close to it,” he added.
Neighbourhoods like Ramapuram, Nesapakkam, KK Nagar, Ashok Nagar, Ekkatuthangal, Guindy and Alandur are in high demand because they are just a few km from Kathipara, a popular hangout area in Chennai dotted with restaurants.
Property rentals have increased by about 15-20 percent in the core city area and 10-15 percent in peripheral areas, depending upon the locality, the age of a building and its proximity to entertainment venues and restaurants, property consultants told ThePrint.
A house owner in Mogappair East, S. Ramamurthy, complained about the increasing tax burden and the increasing cost of property maintenance because of inflation. “After the recent rains, there was a blockage in the drain. I had to spend Rs 20,000 for it. I cannot ask the tenants to share this, since it was not a problem of any individual house.”
“Now that the property tax and other taxes have also increased, whatever I collect from tenants will go into the government’s pockets and nothing will be left for me,” he added.
Chennai Corporation Deputy Mayor Mahesh Kumar told ThePrint they were forced to increase property taxes to avail of central government funds.
“It was long overdue. When there were talks to increase it in 2022 to avail the Centre’s funds, the chief minister asked us not to burden the people,” Mahesh Kumar said. “But now we don’t have any other option since the Union government is forcing us to implement the 15th Finance Commission’s recommendations to avail the rightful funds.”
The 15th Finance Commission report says local bodies must notify the floor rates of property taxes and show consistent improvement in tax collections on par with the state’s own Gross State Product (GSP) to qualify for any grants for urban local bodies. According to GCC officials, rates are determined by the locality, type of property and built-up area.
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How house rentals have impacted lives
India’s property market has picked up pace after the pandemic with prices rising across the country.
According to the National Housing Bank housing price index, India’s eight key primary residential markets witnessed an increase in property prices during April-June this year. Chennai witnessed the second-highest increase at 9.6 percent after Bengaluru’s 10.6 percent. The property tax hike in Chennai has only added to the surge in property prices.
R. Krishnakum, a 28-year-old engineering graduate who shifted from Bangalore to a Chennai suburb six months ago, says his house owner has already asked to increase the rent by 20 percent, forcing him to look for a new house.
He lives in the Pallavaram area where demand for housing has increased even though it lies about 20 km from the city and far from Chennai’s traditional industrial corridors and IT parks. The neighbourhood is also popular because small and medium-scale IT companies have set up their offices in a co-working space on Radian Road close to it.
“I moved from Bangalore to Chennai’s Pallavaram at a rent of Rs 12,500 for 2 BHK houses. It’s just been six months since I shifted and my house owner now demands Rs 15,000 as rent and Rs 1,000 as maintenance because of the demand for houses,” Krishnakumar said.
Krishnakumar says proximity to a new mall and cinema theatres is one reason why Pallavaram is drawing crowds. “The airport and the mall are just two km from the location. There are at least four multiplex theatres in less than four km, of which at least two were opened in less than a year,” he said.
Rentals haven’t just increased in the suburbs, they’ve also shot up in core city areas such as Saidapet, Nandanam, Alwarpet, Teynampet, T-Nagar, Anna Nagar, Nungambakkam, Vadapalani, Koyambedu, Egmore and Purasawalkam.
The rent increase depends upon the age of the property and its proximity to food and entertainment destinations.
Property consultant Mohammed Zubair told ThePrint that demand and rentals in core areas have shot up because of the expansion of Chennai. “The city has expanded so much that even 30 km away from the city’s core area is now developed. So, people are now looking to move so that they can at least save on their travel time on weekends,” Zubair said.
Property consultants add that most house owners prefer tenants from the IT sector.
“Couples working in the information and technology field are the most sought-after tenants by the house owners as none of them will be in the house from morning to evening and they will come to the house only in the evening to sleep,” said M. Vasudevan, a property consultant in the city’s Anna Nagar neighbourhood.
“There is also an impression that they do not bargain much on rents and deposits. And they pay rent exactly on the first date of every month,” he added.
Most consultants clarified that people looking for a house often found housing in their preferred locality or within their budget, but it wasn’t always to their taste.
“Even in a prime location like T-Nagar and Anna Nagar, we can find one BHK house at a rent of Rs 7,500 to Rs 10,000. But it may not be in the likes of the tenants,” said K. Saravanan, a property consultant in T-Nagar. “For example, the place may not have a parking space, the building may be several decades old, there may not be metro water supply or there might be water stagnation issues during the rainy season.”
A retired bank employee and house owner in Alwarpet, M. Ramakrishnan, said rent in prime locations had increased because owners had invested in upgrading properties.
“I own a 2BHK flat in Anna Nagar. Apart from purchasing the flat, I have invested so much in cupboards and other interiors, which might have cost me less had the same-sized apartment been constructed somewhere on the outskirts of Chennai,” said Ramakrishnan.
“Just because it is in Anna Nagar, the workers also charge me accordingly. Hence, I am in a situation where I want to recover my investment.”
(Edited by Sugita Katyal)