The lack of vacant land parcels in the core areas of Chennai is driving builders to the suburbs to launch new and larger residential projects. But for those still wanting to buy new residential apartments within the city, redevelopment projects offer a viable option.

A redevelopment project involves razing an old apartment building owned by multiple residents and replacing it with a modern development. For existing owners, the new building can offer amenities such as lifts and ample parking to meet their needs. In case of higher floor space index (FSI), existing owners get larger apartments, while the residual and leftover FSI will be sold by the builder to new buyers. It also allows builders to sell additional units to outsiders by using the additional FSI permitted by the CMDA (Chennai Metropolitan Development Authority). But this is easier said than done.

Uncertainy creates fear

For instance, Rajesh Chandramouli is president of corporate affairs at Shriram Group, a financial services company. He and his fellow residents have been trying to redevelop their 24-apartment complex in Adyar for over five years now, but with little luck. Arriving at a consensus and getting everyone on the same agenda has been proving to be difficult.

“Redevelopment is a difficult corner to turn. While everyone may, in principle, be for it, many fear dislocation and the uncertainty that the entire process brings,” says Chandramouli. “Besides, if a new person buys into the complex, convincing them is an arduous task as nobody buys in for demolition and waits. The reality is there cannot be a perfect offer that satisfies all.”

The residents began exploring redevelopment options bcause the apartment complex is more than 30 years old and lacks lifts and designated car parking. Moreover, with the road level being raised over the years, the ground-floor apartments have started getting inundated during the monsoon. The residents felt redevelopment could address several of their problems, but consensus has remained elusive, with contentious issues such as GST and the cost of interiors hampering meaningful progress in discussions.

Pricing issue

Chandramouli is not alone in facing difficulties in arriving at a consensus because several factors come into play before the finalising a builder. For V. Sandhya Balachandar, a lawyer and resident in Nanganallur, it took two-and-a-half years to bring all the member residents to agree on a particular builder for redevelopment.

“Ours is a 16-apartment complex with 13 owners. Initially, the residents recommended five or six builders, but differences emerged over the quality of construction and cost. “Since the residents include senior citizens, cost became an important criterion,” says Balachandar. “Most builders were offering good-quality construction, unlike in the past. Eventually, we reached a consensus and signed an agreement with a builder.”

She laments that the building’s location on a 20-ft road and its proximity to the airport mean it is not eligible for any additional FSI. However, the new development will offer ample car parking and a lift.

Woes of TNHB

A view of Tamil Nadu Housing Board (TNHB) flats.
| Photo Credit:
M. MOORTHY

The problems are not restricted to residents of private apartments, but also to those who bought Tamil Nadu Housing Board (TNHB) flats. By virtue of its cluster development approach in the 70s and 80s, TNHB is now the largest supplier of redevelopment projects in Chennai, with properties in prime localities such as Thiruvanmiyur, Besant Nagar, Indira Nagar, Anna Nagar and K.K. Nagar, among others.

“The redevelopment opportunity is aimed at buildings beyond the 30-year mark, and the eligible pool inside the old Corporation limits expands every year”Jerry KingsleySenior director, JLL India

However, TNHB has no role to play in the apartments that they already sold. They retain redevelopment rights in the case of rented apartments; they can sell these redeveloped flats in the open market to new buyers.

“Our 30-apartment building is now 48 years old. In recent years, due to its age and corrosion caused by its proximity to the sea, the building has started deteriorating in patches,” says Sathyabama, a professor at a private college in the city. “We have been trying to redevelop it for the past five years, but to no avail, as the Coastal Regulation Zone [CRZ] norms have made the process extremely difficult.”

According to her, the CRZ norms came into effect only in 1992, while their building was constructed in 1978. She feels that buildings constructed before the CRZ norms were introduced should be exempted when taken up for redevelopment, as such projects would in no way affect the livelihood of fishermen. After years of struggle, they recently obtained approval from the CMDA. However, there is still a long way to go before they can redevelop the building.

Strong social infrastructure

For developers too, redevelopment provides an opportunity to enter highly established micro-markets where fresh land parcels are scarce and expensive. These locations already have strong social infrastructure, schools, hospitals, retail and connectivity. Consequently, the sale component of a well-located redevelopment project can command a premium and generally carries lower location-related market risk than development in an emerging peripheral market.

“Residents need to be given clarity in what they are getting, timelines and how the transition will work”Manu ReddyManaging director, Chaitanya

Leading players in the redevelopment segment in Chennai are Pushkar and India Builders in Anna Nagar, Kolathur and Korattur, Ramaniyam in Chennai South, and Baashyam, Bhagyam and Amara in Besant Nagar and Thiruvanmiyur. All core city areas such as Anna Nagar, Egmore, K.K. Nagar and Ashok Nagar could see verticalisation through redevelopment, wherever permissible under existing norms.

“Redevelopment is a land-recycling story, not a new-supply story. The city’s established localities were built out decades ago and have little developable land left,” says Preetham Mehra, senior executive director and head – Tamil Nadu and Kerala, CBRE, an international property advisor. “So, adding housing there means rebuilding on land that is already occupied. Land values have appreciated while the structures on them have depreciated, and redevelopment helps bridge this gap.”

Current viable options

According to Mehra, two things have made this more viable recently. An upward revision in permissible FSI means the same plot can now support more built-up area than the structure currently standing on it, which is what makes the economics work. And the expansion of metro connectivity has changed how residents view locations across the city, thereby opening areas that were previously not considered for relocation.

Jerry Kingsley, senior director, JLL India, an international property advisory firm, says, “The economy sits in what can be described as an FSI gap, where older housing projects typically operate at 1.5 FSI or less, while current norms including premium FSI allow plots to reach around 4.875 FSI. Structurally, this represents brownfield land aggregation [combining multiple adjacent, underutilised property parcels] involving less than one-acre plots with 8 to 40 owners, negotiated through an association rather than with a single landowner.”

According to him, a government order on apartment redevelopment, Apartment Ownership Act 2022, replaced the 1994 Act that required 100% unanimous consent requirement with a two-thirds majority threshold instead. The reform also unified fragmented public housing guidelines and abandoned the separate TNHB colony policy.

“The redevelopment opportunity is aimed at buildings beyond the 30-year mark, and the eligible pool inside the old Corporation limits expands every year. Mumbai has identified roughly 1.5 lakh ageing buildings and currently runs about 1,000+ redevelopment projects,” says Kingsley.

Upgraded civic infrastructure

While Central Chennai is transforming from low-density commercial blocks and older properties into high-end, ultra-luxury vertical residential towers, north Chennai is evolving from a congested industrial and logistics hub into an accessible, modernised residential frontier with upgraded civic infrastructure.

The change in established Chennai neighbourhoods through redevelopment will largely be restricted to new and larger buildings coming up in place of older buildings, besides high-rises wherever permissible.

According to W.S. Habib, managing director of RWD Pvt Ltd, a leading developer, and President, CREDAI TN, people can sell at market prices and make their presence felt within the core areas of the city. For the buyer, the biggest attraction is the opportunity to purchase a modern home in an established neighbourhood. However, developer credibility, approvals, construction quality, parking, maintenance costs and certainty of delivery will ultimately determine buyer confidence.

“While mostly it is a win-win situation for all as redevelopment can happen only as per approved norms, the lack of consensus or presence of a troublemaker or two among residents create hurdles and results in such projects getting stuck for a longer time,” he concludes.

The writer is a journalist from Chennai.