Is Pune Real Estate In For A Correction?

by Mr. Kishor Pate, Amit Enterprises Housing Ltd.

In a correction, a property market changes from a sellers’ market to a buyers’ market. Demand for houses decreases and the value of one's property goes down. Every kind of property owner - be it end user or / investor - worries about the property market going down and prices 'correcting'.

The word 'correction' in itself implies that there is something wrong which needs to corrected.

Mr. kishor Pate

Pune Property Market ..!

Is the Pune property market going to see a correction? Let us examine what really happens in a correction, and why.

In the first place, real estate corrections do not happen on a national, state or even city level. If and when they occur, they occur in areas of cities where there are a lot of flats which are priced too high. When the prices come down, demand picks up again, so the local market has 'corrected'.

Many More Reasons..!

However, there can be many more reasons why there are more flats on the market than people are willing to buy. Unwillingness to buy can be for many reasons:

    * Flats are available, but not in the budget category where the highest need is

 

   *  Flats in the right budget category are available. However, the economy is weak and people are uncertain about their jobs - and therefore hesitant about making a housing loan commitment

   

    * Hosuing loan interest rates are exorbitantly high & therefore not affordable

If one or / more of these factors prevail, people will not prefer to buy houses & instead opt for rental properties.

As a result, property investors who want to make a quick buck out of residential property by buying cheap & selling higher stay away. But, even in such a market, investors who look at property as a source of regular rental income continue to look for good opportunities and thrive in a rental-driven market.

Housing Loan Interest Rates..!

As far as the national economy is concerned, things are already looking up in India. Inflation is coming down, and the RBI (Reserve Bank of India) has indicated that home loan interest rates will start decreasing from January 2013.

Meanwhile, employment is looking up. Indian companies - especially in the healthcare, manufacturing and  IT (Information Technology) sectors, are already on a hiring spree. With more jobs comes more demand for houses.

Now let us have a closer look at Pune - both as a city and as a property market. Pune's overall fortunes are generated by three (3) industries -

Healthcare,

Manufacturing and

IT.

The first may come as a surprise, but the fact is that Pune scores higher than many of the larger cities when it comes to popularity as a destination for obtaining medical treatment.

In fact, it ranks very high as an international medical tourism destination. This is because Pune is known internationally as a city that offers quality treatment at affordable prices.

In fact, medical professionals in Pune charge up to about 50 to 60 per cent less than Mumbai, Bangalore & Delhi.

Real Estate Prices Lower..!

One of the main reasons why medical treatment costs less in Pune is because real estate prices are lower, which makes running hospitals and clinics cheaper. Since the cost of living in Pune is lower, medical staff also draw lower salaries.

At the same time, the city has some of the country's most competent doctors & state-of-the-art medical facilities. Countless medical jobs at all levels are being created in Pune every year - and with these jobs comes a constant demand for housing.

Pune's manufacturing sector is a national & international industry legend. Almost every global industrial company has operations here, from pharmaceuticals to automobile manufacturing.

These industries are attracted by Pune's highly trained workforce, the cheaper real estate costs involved in setting up & running operations here and the reduced commuting times - which translate into lower attrition and better housing options for employees. Again, the implications on Pune's housing market are obvious.

In terms of IT, Pune is running neck-to-neck with Bangalore & Hyderabad. The city has an incredible saturation of IT parks within a relatively small geographic area. This sector is once again driven by an highly trained workforce and lower real estate costs to both the company & its employees.

Blue Collar Cadre to Senior Management Level..!

The employees from these 3 industries - from the blue collar cadre right up to senior management - are all on the market for homes in varying price brackets within the city.

The transient component of these employees (employees that are not from Pune and will not opt to take up permanent residence here) are a constant source of rental income for investors with properties in the right locations of the city.

With all these factors working in favour of Pune's property market, the justified clamour for a price correction in Mumbai has nevertheless sent its echoes into the Pune market. Paradoxically, it is largely buyers & investors from Mumbai who have contributed to the fast rise in property prices in this city.

Accustomed as they are to the sky-high rates in their parent city, they do not tend to hesitate to pay a premium for the larger, better appointed homes in tempting locations available in Pune.

Property Investment Options..!

By the same coin, Mumbai provides a clear contrast against which to weight the property investment options in Pune. For this reason, there will always be enough buyers for residential property in this city.

Certain areas have certainly reached saturation point, but many of Pune's growth areas are showing steady appreciation in property rates. Moreover, the city offers housing options in all budget categories in almost all locations.

 In such a market environment, it is certain that residential property in Pune will continue to be one of the safest & most rewarding investment avenues for a long time to come. It is certainly a mistake to view it from the same perspective as Mumbai. This market has stood the test of time and is growing rationally into a brilliant future.

With such a constant and steadily increasing demand for residential property in Pune, there is no likelihood of a property market correction. In fact, as indicated by the trends over the past years, property prices will continue to increase every year at a minimum of 7 to 8 per cent in every location.

In plainer terms, this means that the housing options available today will not cost less but more in the next year. This is the main reason why Pune has such a large complement of active property investors - and a clear clue for end users.

About the author..!

Mr. Kishor Pate is CMD at Amit Enterprises Housing Ltd.

Under his visionary leadership as the CMD, Amit Enterprises Housing Limited has emerged as one of the leading brands in the Pune real estate market and has brought up 'Amit Group' to present business volume of Rs. 250 Crores.

A well-known personality in real estate circles, Kishor Pate is the secretary of CREDAI, Maharashtra. Under his visionary leadership, the company is poised for an annualized business growth of Rs. 1000 Crores in the next 3 years.

Amit Enterprises Housing Ltd

Corporate Office Address

Amit House, 1902 Bajirao Road,

Sadashiv Peth, Pune-  411 030.

Tel: +91 20 2448 9494, +91 20 2448 9495

E - Mail: sales@amitenterprises.com

Mumbai Office Address

506 Ceejay House,

Dr. Anne Besant Road, Worli, Mumbai: 400 018.

Tel: +91 22 2499 0079

For Corporate Bookings, Contact: +91 98 22 97 94 79 or email to sales@amitenterprise.com

Media Conatct:

Mr. Jay Kalghatgi

Mobile: 93201 42248

Email: contact@copyconnect.in

Share: