The Gera Pune Residential Realty Report January '14 - June '14
Published By Gera Developments Pvt. Ltd.
The impact of the overall economic slowdown has finally started showing up in residential real estate numbers over the last 6 months. The half yearly average price increase for projects under construction has been at the lowest in years at 2.2% for the period of January '14 to June '14 (See Fig1). In addition to the rate of price increases having slowed, significant numbers of new supply have been launched at lower priced locations which have impacted the average prices in Pune. There is however, a counter effect to the slowdown of price increases of increased loading and extra charges that has to an extent added to the price rise but does not show up in the normal analysis. See story in box "Increases below the line" on Page 4. The average price across the city is now just shy of Rs.5000 psf at Rs.4910 psf.
The average basket of homes has delivered
a 41.29% increase in rates over the last 3 years where average prices in June 2011
were at Rs.3475 psf. The compounded
average growth rate has been 12.25%.
Figure 1 - SIX MONTHLY PRICE MOVEMENT
Investors who have purchased homes 3 years ago with mortgage rates at 10.5% and loan to value of 80% would have seen an equity return of 18.75% per annum, making real estate still an attractive investment especially when factoring in tax benefits and deducting entry load costs.
When assessing the overall gross stock (defined as projects under construction and ready projects with more than 5% unsold stock and more than 10 units), the rate of market expansion has also come down the last 12 months i.e. June '13 to June '14 saw the gross stock rise from 200,944 units to 245,674 units (an increase of 22%, the preceeding 12 months from June '12 to June '13 saw stock rising from 152,311 units to 200,944 units (an increase of 31.9%). It is however true that there is a reduction in new projects launched on account of the delay in obtaining environment clearances. The increased supply of 44,730 units is sizeable and may have had an impact on the price rises seen over the last year 245,674 units (an increase of 22%, the preceeding 12 months from June '12 to June '13 saw stock rising from 152,311 units to 200,944 units (an increase of 31.9%). It is however true that there is a reduction in new projects launched on account of the delay in obtaining environment clearances. The increased supply of 44,730 units is sizeable and may have had an impact on the price rises seen over the last year 66,279, an increase of 29% over the past year (See Fig 2) . Based on the monthly absorption rates of each of these periods the time to sell out the unsold inventories has increased from 5.58 months in June 2012 to 6.47 months in June 2013 to 7.27 months in June 2014.
We decided to assess the market in terms of supply and unsold stock based on the category of housing. The Categories we have created are Budget, Value, Premium, Premium Plus & Luxury. The rates for June 2014 for these categories
are indicated in the CATEGORY table below. We then applied a discount to the June 2014 prices based on the
appreciation over the last 12 & 24 months to arrive at the
pricing for these categories in June 2013 & June 2012.
Fig 3 shows the unsold stock in % terms for each year for each
Figure 2. - OVERALL SUPPLY SITUATION
The premium category (June '14 pricing of 5000-6000 psf) has shown relatively stable sell out ratios over the past 24 months, hovering in the 23% range. The Premium Plus (June '14 pricing of 6000-7500 psf) segment has a slight increase in the unsold stock from 23.4% unsold in June '12 to 24.5% in June '14. An increase of 1.1% (See Fig 3)
Figure 3. - UNSOLD STOCK % BY PRICE RANGE
Changes are seen in the budget and value segment (under Rs.4000 psf and between Rs.4000 & Rs.5000 psf respectively). While the Budget segment has seen an increase in the unsold stock, the value segment has seen a reduction in the unsold stock.
The stress however, is greatest at the luxury end of the market. Here the prices are quoted in excess of Rs.7500 per sq. ft. The total unsold units has grown from 1629 homes in June 2012 to 2629 homes in June 13 - a jump of 1000 homes (showing a percentage increase of 61%), whereas the last 12 months has seen a jump to 4043 homes - a jump of 1414 homes (showing a percentage increase of 53%). Overall the 2 year increase in unsold inventories of luxury flats has risen from 20.9% up to 36.3%. We attribute this to the fact that people in the higher bracket are either businessmen or work at senior levels in companies. In both cases, they are far closer to the pain being felt in the economy since they have corporate/business level exposure and this has translated to a deferment in purchase. When viewed with the Premium Plus segment (prices between Rs.6000 psf and Rs.7500 psf), the lower segment shows a far higher sellout ratio. There is also the likelihood of customers have found greater value in the price below Rs.7500 psf. (See Fig 3)
INCREASES BELOW THE LINE.
To the casual observer, the increases in rates over the past few years may seem to be slowing down. Simultaneously, over the past few years, the rate of increase in luxury specifications and amenities has only increased. Locations where Italian marble or home automation would have been considered extravagant now have a number of projects offering higher better specifications and amenities. All these amenities result in higher costs for the developer but are provided in a hyper competitive market
During the past few years, the city has been able to provide civic infrastructure to many locales where the infrastructure was lacking. In such cases, customers always get the better end of the bargain since homes are actually getting cheaper in real terms with lower rates of appreciation, adjusted for infrastructure, better specifications and amenities. The reality though is that this is only part of the story
On the face of it, there seems to be a slow down in the rate of increase of realty rates. While this is true, the quantum of slow down needs to be viewed with total cost of purchase rather than the traditional rate per sq. ft. model that has been used to value property. There have been two significant areas which have actually increased the rates albeit below the line -
The first is the loading of the common areas onto the carpet area. The loading as permitted under the law is for the common areas that the developer is providing in addition to the carpet area of the home. A few years ago the loading that was being followed uniformly by all members of CREDAI was an add on of 25% to the carpet area. Once the laws were modified to charge based on carpet area plus common areas, the loading anchor created by the association was no longer valid. As a result, today, loading is in the region of 33% to 35% on the carpet area for the common areas. This has had an impact of 8%-10% on carpet or 5%-7% on the saleable areas.
The second area is the increase in the extra costs. Various charges including club house charges, infrastructure charges, municipal/approval charges have increased over the last few years. These extra items have risen more than the rates themselves thereby having a positive impact on the overall cost that the consumer pays for the home. This however, is not surprising since the consumer looks at the cost per sq.ft and as such, feels satisfied that the rates have not risen. In reality, the overall cost of ownership has increased over the last few years.
Ultimately, buying a home is about finding a property that suits ones needs from a number of angles. Timing the market is as elusive in real estate as it is when it comes to the stock market. Those with a need to buy a home are well advised to purchase the best deal they can when they have the need.
The top and bottom micromarkets with the highest and lowest price gains in the past two years are shown in figures 4 and 5 respectively. (See Fig 4 & 5)
Figure 4. - TOP 10 MICROMARKETS WITH THE HIGHEST PRICE GAINS IN THE LAST 2 YEARS
Figure 5. - BOTTOM 10 MICROMARKETS WITH THE LOWEST PRICE GAINS IN THE LAST 2 YEARS
Chakan and the Kondhwa neighborhoods are the markets that have seen the most infusion of new supply coming in followed by Wagholi and the Pradhikaran region of PCMC ( Fig 6).
Figure 6. - NEW UNITS LAUNCHED
(Top 20 micromarkets with fresh supply launched)
Years of the economy slowly grinding to a halt has finally seen the impact on the real estate sector
While there is a renewed sense of optimism in the air, the same has not translated into demand into the market place as yet. This enhanced demand when triggered has the potential to create an upward pressure on prices as we have seen in earlier years.
The counter effect to increasing prices is the hope that that simplified procedures with reduced red tape will improve the supply into the markets thereby keeping prices in check.
The question of the timing of these two things will determine the impact on prices. The more likely outcome seems to be that the optimism will turn to demand sooner than the simpllification of processes and reduction of red tape
Our previous price outlook had indicated an average increase of 13% to 18% for projects under construction for the year 2014. The first half of the year has shown a mere 2.2% increase. Keeping this in mind, we have revised our outlook for the future and have recast price increase expectations for the upcoming 12 months to be in the region of 10% to 14%.
Media Contact : Sonia Kulkarni - email@example.com
Gera Developments Pvt. Ltd Contact : Nikunj Dube - firstname.lastname@example.org
Copyright owned by Gera Developments Pvt. Ltd.
All data, the analysis thereof and the graphical representation in the report is the intellectual property of Gera Developments Pvt. Ltd. and no part or whole of this report can be duplicated or quoted without the due permissions and credits given to Gera Developments Pvt. Ltd. Photographs of residences are purely for representation and are royalty free stock images. This report expresses the views and opinions of the company only. The report has been prepared in good faith on the basis of data collected by an independant research arm of the company without any external third party verification.
I’ve been a sports person, and also captained my throwball and volleyball teams. I understand the importance of extracurricular activities in our growing up years.
Trainings provide a child with the required discipline when working within teams as well as gives one the chance to follow what makes you happy. It also enables an overall development!
Dance has been my passion since I was a child and I have been thrilled to see both my little ones have this in their genes too.
This opportunity really came to my doorstep through Gera. My daughters Lavanya and Diya have had an enthralling experience being a part of not just one but three Academies (The Shiamak Davar Dan..
I cannot thank you enough for making our journey with Gera so so interesting and mind-blowing. I had never ever imagined my life taking a beautiful turn with me beginning to start my career as a music teacher that too with SMA (Shankar Mahadevan Academy) and all this has been possible only because of GERA and YOU my dear.
It is only because of your efforts and kind gesture that I could meet the man himself (Shankar Ji) and have a small recording session with him. That was like a dream come true.
I am super excited to start my journey with SMA and Gera as a teacher now.
Apart from that, Me and Prateek have always been grateful to you for making Shiamak happen for us and I ..
It was indeed a pleasure being a part of the Christmas celebrations at Astoria. Kudos to the Gera team for bringing in such a wonderful event with great carol singing participation from our own kids. It brought in the spirit of Christmas and the games, Santa, the gifts only added to it. Thanks for organising such a wonderful event which helped in community building...looking forward to many more such celebrations!..
The Christmas event organised at Astoria was a big success and a big step in bridging the gap between us and Gera. It was a memorable event as we are still in the beginning of our journey of life in our little home at Astoria. The kids have been the happiest of all and what more can we ask for when we see smiles on the faces of our little ones. Kudos to you and your team for making this event a huge success! Looking forward to many more in the years to come...
The Christmas party organised by Gera at Astoria this year was a great success with good participation from kids and parents. Our children Sia and Saish enjoyed the party to the fullest. Sia, in particular, had a gala time and reiterated her stand that Anita aunty's parties are THE BEST.... We as your customers take much pride in informing our friends that such goodwill gestures are one of the many differentiators Gera brings to us, which no other builder in Goa can boast of. Many thanks to you and your team for doing an excellent job in putting up this event. We look forward to the next one! A big thanks to the Gera Management for its efforts in community building...