by Kishor Pate, CMD -
Amit Enterprises Housing Ltd.
Pune real estate
& information technology (IT) are inseparable concepts today, and it is
interesting to reflect on how this came about.
To understand the 'IT
Effect' on residential real estate in Pune, one needs to understand how Indian
real estate has been changing over the years.
Property
investment destination..!
Every year, we hear
of new property investment destinations coming up. Some work out well for
property investors, and some do not. Whether or not a property investment
destination in India lives up to its initial potential or not depends on a
number of factors.
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| Kishor Pate, CMD - Amit Enterprises Housing |
One of the main
factors is employment. An area in which a number of companies are opening up
job opportunities for the local population becomes of interest to residential
property developers, because they know that people want homes near to their
places of work.
Developers /
promoters do a lot of research before they decide to launch a residential
project in or / around an area with a lot of existing or / emerging job
opportunities. It is important for them to know what kinds of companies are
offering jobs, because the nature of these jobs indicates the employees' salary
range.
If the jobs are
mainly for retail or support services, this indicates that the employees will
be drawing relatively smaller salaries. In other words, budget housing will be
in greatest demand in such an area. Luxury housing would not draw any interest.
On the other hand,
jobs created by large corporates and multi-national companies tend to offer a
much wider band of incomes. Such companies create back-office, middle
management as well as 'C Suite' jobs.
This means that
developers can launch projects that cater to a wider band of income levels -
affordable housing, middle-income housing and luxury housing. Homes in all
these categories will be in demand.
Information
Technology Boom..!
This would have remained
a predictable formula for Indian real estate developers to follow if job
creation in India would have remained at the level of manufacturing, retail and
financial services. However, matters changes drastically when India launched
into its Information Technology boom in the middle 1990s.
This was the period
in which more & more companies, mainly from the United States, started
outsourcing IT related jobs to India.
Even
when the resulting employment was mostly limited to call centre jobs, a lot of
young Indians began at salary levels which their parents had worked half their
lives to reach.
Back then, home loans
were quite affordable at interest rates between 7-8%. High salaries at a young
age meant long repayment tenures for home loans, translating into attractively
low EMIs. This, coupled with the inherent yen for every Indian to own their own
home, launched the IT-linked housing boom in India.
Within a relatively
short period, the jobs being created by the IT industry in India went beyond
call centres and medical transcription and began involving software
development. Salaries skyrocketed, and more and more young Indians were sent
for training to the US - returning with a wider world view, higher aspirations
and a taste for luxury. This is when cities like Bangalore, followed by
Hyderabad and Pune, became hotbeds for high-end housing.
These foreign IT
companies needed large spaces to set up shop. But unlike banking and retail,
they did not need to be in the city centres, so they opted to launch their
campuses in areas of Indian cities where the land costs were still low. To
compensate for the distances that employees living in the city would have to
travel to reach their work places, they offered them gratis shuttle services.
Real
estate effect..!
However, then the
'real estate effect' began to take hold in these areas. Developers started
launching housing projects around these IT hubs, and the demand for homes close
to these companies continues to be huge. This is why the profiles - and the real
estate prices - in these previously unknown areas began rising.
Now, IT hubs such as
Hinjewadi, Tathawade, Kharadi and Magarpatta in Pune are literally dictating
the trend of residential real estate development in and around these areas.
Aundh, Baner, Ambegaon, Undri and many other locations from which these IT
parks can be reached are seeing massive development. The response by property
investors has been huge, because residential real estate rates in these
locations are rising with every passing quarter.
About the author..!
Mr. Kishor Pate is
CMD at Amit Enterprises Housing Ltd.
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