New Delhi: Pune Residential Real Estate Market
It is no secret that 2013 was not a very good one for the Indian real estate sector. The economic slowdown, coupled with political uncertainty, led to a downward trend on the property market. On the residential property front, high property prices and home loan interest rates kept a large number of buyers waiting on the side-lines across most Indian markets.
However, despite the overall slowdown in the sector, the property market in Pune maintained the steady momentum that tends to define all stable real estate markets.
At this point in 2014, anticipation rides high on the outcome of the general elections. Considering the current political scenario in the country, the arrival of a new Government could spell a positive change in country's economic scenario. Any significant rectification of the status quo would help in stabilizing the stock market, which in turn has relevance to the growth parameters of real estate development.
Meanwhile, Pune's real estate market is showing healthy growth across most asset segments.
Mid-Income Housing – Demand Crystallizing And Expanding
Considering the concentration of population that is professionally active in the IT and manufacturing industries, there is now a greater demand for multi-storey apartments. Residential micro-markets like Kharadi and Wagholi in East Pune and Pimple Nilakh, Pimple Saudagar and Wakad in West Pune are seeing a lot of residential development, driven by good connectivity with the key centres of the city and the presence of good social infrastructure like schools, hospitals, malls and entertainment centres.
LOCALITY PRICE (Rs. / sq.ft.)
Kharadi 5500 - 6000
Wagholi 3500 - 4500
Pimple Nilakh 5500 - 6500
Pimple Saudagar 5500 - 6500
Wakad 5500 - 6500
All these areas have demonstrated a steady increase in customer inquiries and are poised to grow exponentially in the future.
Affordable Housing - Rapid Growth On The Peripheries
The luxury homes segment has been burgeoning on the Pune's real estate market, with many large players entering with projects. However, we are now witnessing a slight shift in the development trend. Many new players on Pune's real estate market are now venturing into affordable housing segment. This is obviously where the greatest demand lies.
Affordable housing projects tend to be located on the outskirts, offer small 1–2 BHK flats and provide basic, no-frills amenities. Over the last couple of years, Pune has recorded a certain amount of growth in this segment. Interestingly, while there has been compelling growth in the high-end segment with luxurious 3-4 BHK homes, the budget housing story is far more attractive to investors.
Pune's real estate landscape is expanding constantly, and the prices of the land on the outskirts are still low. This gives developers a chance to offer affordable 1 and 2 BHK units price-tagged at between Rs. 10–22 lakh.
Players like Maple, Jalan Group, Vastushodh and Javdekar Group are now actively targeting this segment by providing decent amenities – and they have long-term plans of expanding into the entry-level housing segment.
These affordable housing projects are spread across different sectors of Pune. Locations such as Moshi in Pimpri-Chinchwad, Pirangut on the Lavasa Road and Kirkitwadi ahead of the Sinhagad road are seeing more and more development activity by local players such as UrbanGram, Vastushodh and Aapla Ghar. The emergence of upcoming townships like Nanded City is proving excellent investment opportunities, as the prices in such projects are set to soar in the near future.
The demand for these projects comes from both the IT and manufacturing sectors. As Pune has many major manufacturing industries situated on the outskirts of the city, the demand for the affordable residential housing is scaling up among blue collar buyers. Factors such as constantly improving connectivity and the increasing availability of social infrastructures like hospitals and schools are the primary drivers of investment potential for these projects.
Locations like Sanaswadi, Lonikhand, Talegaon Dhamdhere, Shikrapur on Nagar Road and Shirwal towards Satara are thriving industrial hubs. These areas are now seeing some major affordable housing development by players like Maple, Pratham Developers, Star City and CFP, and the demand is excellent owing to the affordability quotient of these projects.
The reception of entry-level housing projects in Pune always generates a lot of interest from end users and investors. The affordable housing proposition is especially attractive for first-time home buyers, since they benefit from a tax deduction of one lakh rupees on the rate of interest paid for housing loans up to Rs. 25 lakhs, provided the value of the flat does not exceed Rs. 40 lakh.
Investors are not only attracted by the low price tags of these projects. They also see that the rapid connectivity enhancements and improving social and civic infrastructure at these locations, as well as the fact that many of these projects are by reliable, market-proven developers, translate into significantly faster and higher ROI than mid-income and luxury housing.
LOCALITY PRICE (Rs./sq.ft.)
Talegaon Dhamdhere 2500
In a significant development that points the way for a growth trend of the future, certain multi-national manufacturing companies have acquired large numbers of units within these projects for their employees. In fact, the strategy of providing housing to employees in order to boost loyalty, curtail attrition and attract more staff is one that works very well in the Indian context.
Super-Luxury Housing – High And Rising
Pune's mid and luxury residential property segment also began gaining significant traction over the past two quarters, resulting in a very healthy rate of inquiries translating into sales. The city's developers are understandably upbeat about the response that ultra-luxury housing continues to evoke in Pune, and are launching projects with the motto that luxury knows no recession. Luxury housing in Pune is, in fact, now defined by a whole new dimension when it comes to amenities and conveniences.
In industry terms, super-premium housing in a city like Pune is defined by projects which have unit sizes of 3500 square feet and above, complemented with addresses that convey status and prestige, carrying price tags of Rs. 12000/sq.ft. and above.
Some of the notable super-luxury housing projects in Pune are:
· Trump Tower - being jointly developed by Panchshil Group and the US-based Trump Group at Kalyaninagar
· Yoo Pune - designed by Philippe Stark and being developed by Panchshil Group at Magarpatta
· Verde - being jointly developed by ABIL and Clover at Kalyaninagar
· Fountainhead - being developed by Phoenix above Phoenix Market City on Nagar Road
· Marvel Aurum - being developed by Marvel Realtors at Koregaon Park
· Marvel Ribera - being developed by Marvel Realtors on Boat Club Road
· Castle Royale - being developed by ABIL at Bhosale Nagar
· Shiloh - being developed by Kumar Properties at Model Colony
· Balmoral Estate - being developed by Kasturia Housing at Baner
· Portia - being developed by Vilas Javdekar Developers at Baner
· Sky One - being developed by Paranjape developers at Model Colony
· Sky Belvedere - being developed by Lunkad Realty near Pune Airport
· The Spires - being developed by Pride Group at Aundh
· Amar Renaissance - being developed by Amar Builders at Sopan Baug
Pune - Commercial Real Estate Market
While the residential real estate market in Pune is definitely slow this year, the demand for office space has been more upbeat over the past two quarters. Out of the total supply of 54 million sq. ft. at this point in 2014, 12 million sq. ft. are currently available for absorption.
Pune has seen marginal but satisfactory growth in the office space market over the last two years. In 2013, the absorption of office space in Pune clocked in at 4.5 million sq. ft., similar to the preceding year but marginally short of the estimated 5.1 million sq. ft. mark. Pune currently has 20% of vacant Grade A office stock available for absorption.
The fourth quarter of 2013 saw an addition of 7.3 million sq. ft. of office space, significantly higher than the 3 million sq. ft. added in the preceding quarter. Of this, Pune contributed almost 30% followed by Bangalore (26%) and Hyderabad (15%). Higher vacancies and lower demand levels have resulted in the delay in the delivery of a significant number of projects in the eastern corridor.
LOCALITY RENTAL RANGE RENTAL RANGE
IT RENTAL (Rs./sq.ft.) NON-IT RENTAL (Rs./sq.ft.)
Aundh 60-70 60-75
Baner 40-55 50-70
Bund Garden Road 50-70 70-110
Hadapsar 40-60 40-70
Hinjewadi 30-45 45-60
Kalyani Nagar 45-55 55-105
Kharadi 35-45 50-60
Nagar Road 40-50 45-70
Viman Nagar 40-50 45-70
Yerwada 45-85 53-64
Shivaji Nagar 60-90 65-150
The western part of Pune - primarily Hinjewadi and parts of Aundh and Baner - has been the major contributor to the city's commercial real estate market. With the completion of the EON IT SEZ in Kharadi, an additional 1 million sq. ft. of commercial office space has been added to the existing stock.
The most active areas in terms of leasing activity are being seen in the off-Central Business District micro markets of Yerwada, Hadapsar, Kharadi, Kalyani Nagar, Viman Nagar and Nagar Road. This can be attributed to multiple factors such as good availability of Grade A office spaces which offer proximity to good social infrastructure and connectivity to various key nodes of Pune.
The major demand for commercial office space comes from the IT/ITeS segment and as well as the banking sector. With diminishing Grade A office stock and increased availability of Grade B and C projects, rentals are scaling up despite minimal absorption.
Meanwhile, large players with commercial projects in the pipeline are focusing primarily on non-IT projects such as World Trade Centre (WTC) by Panchshil Realty, Sky Vista on Airport Road, Edge and Juno in Viman Nagar by Marvel Realtors and Central and Fuego in Hadapsar, also by Marvel Realtors.
This trend suggests that the availability of non-IT commercial space in Pune is bound to rise. Simultaneously, this focus by Pune's leading commercial developers will result in a decrease of IT space availability, indicating that rentals in available IT stock are set to rise.
Sanjay Bajaj is the Managing Director of JLL India, Pune