In 2017, sentiment on the Pune’s residential property market will remain positive
Pune Residential Real Estate – A Cautious
Revival
by Mr. Sanjay Bajaj, JLL India
2016 was a year of landmark decisions for the
Indian real estate industry, with the residential sector in particular
witnessing concerted efforts by the Government to bring in transparency and
boost consumer confidence. With the implementation of regulatory policies like
the Real Estate Regulatory Act (RERA) and GST to provide a uniform and
transparent taxation regime, 2017 has turned out to be quite positive so far.
The green shoots of revival are now visible in India’s residential real estate
sector.
This is heartening, as the realty sector was
quite lackluster over the past two years, defined by low absorption levels and
oversupply in many cities. However, the 2017 Union Budget and the recent
deployment of pro-market regulatory policies such as GST and RERA have begun
setting a positive momentum, with cities like Pune benefitting the most.
With its unique confluence of economic growth
drivers and rapidly developing infrastructure, Pune’s real estate market has
for long been performing much better than many other major cities.
The city’s inclusion in the ‘100 Smart Cities’ list has now led to Pune gaining
increased importance on the back of the implied infrastructure enhancements
that this major Government program demands.
The MahaRERA Effect:
Simultaneously, the implementation of MahaRERA
has caused a significant realignment of the market. In fact, the day on which
RERA was officially deployed created visible ripples on the Pune residential
property market. A majority of the project hoardings which previously occupied
every nook and cranny of the city vanished, thanks to RERA’s strict stipulation
that only duly registered projects could henceforth be advertised.
Today, RERA
registration numbers are prominently displayed on the new hoardings – a clear indicator
that the city’s credible developers have taken this new Act to heart and are
living up to it.
In the post-RERA era, new residential project
launches in Pune have slowed down. The larger developers are focusing on
completing ongoing projects and making them RERA-compliant; most of the smaller
players in the unorganized segment are choosing different tactics to sustain in
the market.
They are either finding buyers for their land, integrating with big
players through joint ventures or are trying to make their projects
RERA-complaint.
Despite being one of the most active
residential markets in Maharashtra, Pune’s real estate market did show
declining growth in 2016. Launches reduced in the last few quarters of 2016 due
to accumulated unsold inventory of 2015 and uncertainty about the impending
regulatory changes. The unsold residential inventory in Pune stood at
41,000 units by end 2Q17.
Current Market Trends:
The effects of the generalized market slowdown
across the country, combined with the effects of demonetization and RERA,
certainly had an impact on Pune’s realty market. While the city’s residential
property market is now displaying signs of returning interest by end-users,
this momentum is defined by a lot of caution and indicates that growth will be
gradually going forward.
At this stage of 2017, the city’s property
market continues to be largely end-user driven, with speculative investors now
accounting for only 10-15% of purchases, where they used to account for as much
as 20-25% in 2010-11.
· The highest-selling categories in
Pune currently are mid-income housing (which ranges between Rs. 4,500-
6,000/sq.ft.) and affordable housing (priced between Rs. 3000 – 4500 /sq.ft.)
· The higher mid-income segment (defined by properties
selling at between Rs. 6000- 9000/sq.ft.) is currently seeing relatively lower
traction, while luxury housing continues to under-perform significantly when
compared to peak years of 2010-11.
· Some established micro-markets such as Hadapsar,
Wanowrie, Kharadi and Aundh witnessed robust rental growth of around
8-12% in 2016, while emerging markets like Undri-Pisoli,
Bhugaon, Wagholi,Dhanori,
Pirangut, Hinjewadi and areas in
close proximity to it saw thehighest annualized capital price appreciation
of 8-10%
· The rate of residential sales settled
at 12.2% in 2Q 2017 as compared to 11.4% in 4Q 2016 – clearly
indicating that the Pune market is absorbing the new regulatory environment
maturely
· Housing priced in the budget range of Rs. 20-35 lakhs
is now witnessing increased interest from private developers, and is turning
out to be a key driver for housing sales in Pune.
· The average capital value appreciation across
micro-markets in 2016-17 was rather tepid at 3-5%, but the readings
are expected to look a bit more positive towards the end of 2017, by which
times the market will have recovered from the larger regulatory after-shocks.
Affordable and mid-segment housing (in the price range of Rs.
3,500-6,000 per square feet) added more than 25,000 units to the Pune residential real
estate market in 2H 2016-1H 2017. The fringe areas of Pirangut, Bhugaon,
Wagholi,Dhanori, Hinjewadi and areas in close proximity to Hinjewadi
saw the maximum demand on the back of lower ticket sizes coupled with good
connectivity to the city’s primary IT hub.
This trend will continue, with
several more affordable and mid-segment projects likely to hit the market in
these areas over the next 12-18 months.
Areas such as Dhanori, Wakad,
Ravet, Undri-Pisoli, Hinjewadi and Wagholi are now witnessing significantly
increased sales enquiries, and will remain among the preferred destinations for
middle-income end-users in the short-to-mid-term.
The response to
newly-launched projects by strong, credible developers demonstrating RERA
compliance is noteworthy, which in turn is encouraging developers to put
maximum efforts during the launch process
With many new players having ventured into the
affordable housing segment, the luxury homes segment is currently seeing
stagnant prices, with limited demand and supply. Demand in this segment is
likely to pick up significantly only after 18-24 months.
Market Drivers:
· IT/ITeS continues to be the key demand driver for
residential real estate, with the population employed in this sector
contributing significantly to residential demand. Pune City has witnessed an
average commercial absorption of 4 million sq. ft. in the last 3-4 years.
· Apart from IT/ITeS, continued healthy job creation in
the city’s manufacturing and automobile industries
is driving sustained inward migration from Pune’s
rural areas, other Maharashtrian cities like
Kolhapur, Nashik and Satara, and other parts of India
· Technology
will play a key role as residential developers explore newer ways to optimize
space utilization within their projects.
After the undoubtedly dampening effects of the
demonetization move in late 2016, Pune’s property sector retained its status of
being one of the country’s most stable and reliable residential markets. With
various major infrastructure projects underway or on the charts, the city will
soon experience vastly accelerated momentum in terms of real estate
development:
· The proposed plan for the development of Pune Metro
will have an effect on the prominent areas on the city’s CBD belt along with
areas of Hinjewadi, Aundh,
Pimpri-Chinchwad, Kharadi and Viman Nagar.
· The proposed Ring Road project will leverage the
peripheral areas of Pune
· The Pune River Front Development Project will
positively impact the areas on the Western and the Eastern belt.
Conclusion:
In 2016, Pune remained a buyers' market and
primarily end-user driven. Developers vied with each other for customers in
most locations - a 'competition' in which only those with projects nearing
completion emerged as clear winners.
High buyer caution prevailed throughout
the year with regards to under-construction projects in the earliest stages of
development.
In 2017, sentiment on the Pune’s residential property market will
remain positive, and fringe areas that offer better affordability and returns
on investment will pick up.
About the author..
Mr. Sanjay Bajaj, Managing Director – Pune, JLL India
Arun Chitnis
Head - Corporate Communications & Media Relations
JLL India
Level 6, Amar Avinash Corporate Plaza
Bund Garden Road,
Pune 411001.
Tel: (020) 40196100 Fax: (020) 40196101
Mob: 91 9657129999
Website: www.joneslanglasalle.co.in
Blog: www.joneslanglasalleblog.com/realestatecompass
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