The Times of India, Times Property, Pune - December, 2006

The real estate industry that was buoyant in 2006 will continue to be so in the next year.

The residential market in Pune has grown by 30% in the last one year and has seen appreciation by about 50%. In commercials the demand has gone up by 25% and about 3.5 million sqft has been absorbed. The projections for the next year are four million sqft.

The economy has been doing well; the IT segment, the manufacturing sector and financial sector have been the drivers of growth in Pune. There has been huge demand from the professionals employed in these companies. With Bangalore having infrastructure problems, Pune has structure problems, Pune has emerged the natural choice for the IT industry as it offers better infrastructure.

Companies Like Infosys and Wipro have expanded their campuses in Pune. On the west, places like Aundh have seen demand driven by IT companies in Hinjewadi. On the eastern side, demand has been driven by IT companies in Hadapsar, Kharadi.

There has been a 40% appreciation during the last one-year, with the first three to four months seeing a 25% rise and the last six months seeing a more steady trend.

“Properties that were quoting at Rs 1,200 per sq.ft, 18 months ago, rose to 1,900-2,000 in the beginning of the year, and are now quoting at Rs 3000 per sq.ft. Going forward we will see a 12 to 30% appreciation depending on the product, the kind of developer, the stage of the project, says Rohit Gera Executive Director Gera Developments Pvt Ltd.

Property consultant Ravi Verma says the prices in the first six months were galloping but from September to December, most prices have been steady. In residential, Aundh, Koregaon Park, Nagar Road, Airport Wanowrie, Kondhwa are doing well. There has been higher appreciation in Kalyani Nagar Rs 3,500 to 6,500 i.e. 80% to 100%. Vimannagar from Rs. 1,500 to Rs 3,000.

Winds of change have also been blowing with the entry of FDI in Pune. Gera Developments have entered into a joint venture with Citigroup Property Investors to develop 2 million sq. ft. of high-end apartments, country club and a hotel. “The next year will see more projects with FDI,” says Gera . “The benefits of FDI and private equity participation would mean larger sized projects, increased move towards more professionalism in the industry in order to compete. Better delivery timelines, imbibing quality to customer would be the benefits to customers,” he observes.

According to Vishwajeet Jhavar from Marvel Realtors, customers are becoming more demanding. The upmarket customer who has traveled abroad demands the latest in amenties and technology. Like say a swimming pool in each flat, Jacuzzi etc, and not very many developers are catering to this segment.

Property Consultant Ashok Kumar, MD, Cresa Partners says there has been a definite trend and demand for luxury apartments and high-end rental apartments for corporate employees. There are very few developers fulfilling this demand. Marvel Realtors, panchshil Realty are some of the developers catering to this market.

Most of the developers are catering to the 2BHK, 3BHK segment in the range of 25-35 lakh and 35-50 lakh. The mass market is driven by housing loans, sensitive to interest rates and buyers are from the lower line of the IT, manufacturing sector and financial institutions.

While it has been a predominantly seller’s market, the customer too are very savvy today, say developer like Gera . The customer is not willing to accept any random price dished out if it is not matched with quality. The beginning of 2006 saw unjustified price increases. This was more due to the flat market earlier and the resultant exuberance. The intervention of RBI, restricting credit to developers, and other measures, has brought down the froth to some extent, which is a good and healthy sign.

Hemant Naik Navare says unjustified price increase will not work in the long run and are unhealthy for the market. He says there has been an unending demand in the residential segment which private developers have not been able to fulfill. He points out that the seller’s market will change only if two things happen. One, if the connectivity increases from the outskirts to the inner city. We will then see more projects come up in fringe areas like Talegaon, Pimpri Chinch wad. This will also start controlling the prices, as there will be more options available. Better road connectivity will also help projects on the Pune-Kolhapur road. About 15 to 20 major projects are expected to come up next year.

Builders and consultants say the approval and finalisation of the Development plans for Pune hanging fire for two years, needs to be done urgently if prices are to come down. A lot of investments in land have been done in fringe areas in the PMC and PCMC limits.

However the projects have not been launched, as these plans are not finalized. The projects not coming up in the market have created a capacity crunch, and resultant price spiral.

Hopefully the government will also release the rules for the slum Rehabilitation Projects.

The slums are mostly in the inner city. Once they are rehabilitated, more TDR would be generated and as prices of flats built from TDR too will come down.

There has been a reduction in investor interest in the last few months, as investors are offloading and realizing returns. Developers also are looking for selling it to more genuine users. Hence in some of the projects they can sell only after possession and payment of stamp duty and registration. Says Gera, “We are into building communities and don’t want too many investors, which will create ghost towns.”

The new year will continue to see demand from the IT and manufacturing segment, the trends for luxury apartments will continue though the exuberance may be limited slightly as the prices have already gone up substantially