INTEGRATED GROWTH

Like Mumbai, Pune, the educational capital of the country, has witnessed a significant development in the real estate space. Prajakta Karnik speaks to industry players to understand the challenges and growth opportunities in this market.

Pune real estate has witnessed a significant transformation in the last few decades, owing to the rapid infrastructure and industrial development across the city and its outskirts. Also, the growth of the tech sector here, with businesses setting up IT hubs, have further accelerated the growth of residential and commercial real estate.

"All these factors have augured well for the residential and commercial growth in the city over the last two decades. With an estimated population of 7.4 million as of 2020, the city has seen sustained migration of professionals over the years. No wonder, it has transitioned from a Pensioner's Paradise into a vibrant economic hub close to the Mumbai," said Akash Pharande, Managing Director, Pharande Spaces.

The setting up of Pune Metropolitan Region Development Authority (PMRDA) on the lines of Mumbai Metropolitan Region Development Authority (MMRDA) has also resulted in sustainable development both economically and ecologically in Pune including Pimpri-Chinchwad and its surrounding areas.

Some of the key infrastructure projects undertaken by various authorities such as the Pune Municipal Corporation and PMRDA include, Pune Ring Road, Pune-Mumbai Hyperloop, Hinjawadi - Shivajinagar Metro, Bus Rapid Transit Route and High Capacity Mass Transit Route among other road projects. Also, the addition of new areas under the Smart Cities Mission has propelled the growth of real estate in Pune.

"In the past few decades, along with the city, the peripheral areas such as Talegaon, Chakan, Pimpri-Chinchwad, have seen tremendous growth and also emerged as prime development nodes due to the enormous industrial growth potential in these areas. Owing to the constant rise in population, growing real estate, socio-economic growth, infrastructural advancements, migration, and fast-growing industrialization, Pune has grown exponentially. The city has offered promising micro-market, and it mainly comprises people working across IT companies, BFSI, motor and automobile industry , students and others. To further support the growth of Pune, the government has granted Rs 650 billion over the next 7-8 years for the construction of a metro rail link, a new airport terminal and a ring road, which will further lead to the development of new flyovers and roads, International exhibition and convention centre, Mumbai-Pune Hyperloop one, Satara economic corridor along with other regional infrastructural developments," said Vineet Goyal, Joint Managing Director, Kohinoor Group.

Integrated Township

Unlike Mumbai, Pune still has large open spaces, which are being acquired by developers to create integrated township developments. Some of the prominent township projects include Paranjape Schemes Construction, City Development Corporation's Amanora Park Town, Magarpatta City, Kolte-Patil's' Life Republic near Hinjewadi,  Kumar Builders' Kul Nation at Manjri, Kumar Properties and Avinash Bhosale Industries joint venture project Megapolis at Hinjewadi, D S Kulkarni Developers' DSK Dream City and Nanded City Development and Construction Company's township project Nanded City on the Pune-Sinhagad Road.

"Township in Pune has been a great investment prospect for developers. Also, opting a house in an integrated self-sustaining township keeps residents away from various security risks. Spanning hundreds of acres, these townships include independent houses, apartments, shopping malls, cinemas, schools, hospitals and all other facilities that are there in developed urban centres. Eco-friendly environment, large open spaces and many other amenities are the key attraction for buyers. Townships with multi facilities are definitely expected to do well even post the pandemic," said Annuj Goel, Managing Director, Goel Ganga Developments.

Echoing similar views, Pharande said the pandemic has changed consumer preferences with many now looking to live in bigger, open and greener spaces - all within a gated community.

"And notably, there are several housing societies that offer just the right mix. For instance, Pune's satellite town Pimpri Chinchwad has several housing societies to boast of. Several branded developers have also launched many large township projects here with state-of-art amenities. As many as 92,000 housing units have been launched in the PCMC region between 2013 till date. Of these, 92% were priced within Rs 80 lakh and come in various sizes and configurations. Above all, the well-developed infrastructure at PCMC is a major advantage. And the ongoing metro project will further boost the real estate potential of the area once operational," he added.

"Co" Factor

Over the last couple of years, Pune has witnessed a surge in student housing, co-living and co-working models. This model became popular as the significantly large population which lived in rented accommodation faced challenges in finding decent, uncompromising yet affordable apartments.

Coliving is a modern form of housing where tenants have their own private bedroom and bathroom and share common living spaces. These homes are integrated with technology Due to the popularity of these models, many developers have adopted the asset-light strategy of leasing residential units or an entire building to coliving service providers.

However, today these sectors are facing challenges due the pandemic induced restrictions. "Covid-19 has severely impacted the current business. Colleges as well companies are yet to start on campus. Many businesses are on ventilator. Occupancy has become zero at some of the properties and is just like hospitality where many co-living and student housing businesses are shutting shop. Post Covid-19 we would see organised operators in the co-living industry with hygiene and safety standards becoming the preferred choice for students and professionals. And that's when the Industry would again see revival and growth," Goyal noted.

Covid Impact

The pandemic has impacted the real estate sector across the country with new launches witnessing a decline in the last two years. According to a recent report by Gera Developers on the Pune real estate market, new launches fell 30%, while inventory for sale plunged to a 9-year low in June 2021. The report also noted that property prices are set for surge due to supply squeeze experienced in Pune's residential real estate space.

“The market has been in an ongoing state of consolidation. With the number of new project launches declining, the unsold inventory has plunged to a seven-year low. Going forward, we believe that price rise seen in the past one year will gain further momentum. The surge in residential real estate prices will be due to decline in adequate inventory to meet the growing demand. Whenever demand outstrips supply, prices tend to go up," said Rohit Gera, Managing Director, Gera Developments.

While reputed developers with a track record and a differentiated product continue to be able to see strong sales leading to rapid construction on the site; those at the opposite-end of the spectrum are finding sales to be challenging and consequently, construction pace is slow, further affecting future sales.

“With new project launches at unprecedented lows, the robust demand will face supply-side bottlenecks. This has already propelled a 3.73% surge in property prices on an average, over the past 12 months. However, as new project launches firm up, the prices, while maintaining their upward bias, will stabilize in the medium term,” Gera added.

According to the report, H1 2021 saw a fresh supply of 26,611 units which is 26% higher than H1 2020 however, sequentially it has come down by 30% compared to H2 2020. Comparing it with pre-Covid times, it is still half of what it was in December 2019 just before Covid hit the country.

Also, inventory levels have plunged to a 9-year low in June 2021 to 59,224 units, a reduction of 21% from 75,421 units a year ago. The total number of ongoing projects has also dropped significantly from a peak of 3,733 projects in Jun 2017 to 2,730 in Jun 2021.

Interestingly, the premium segment has seen a whopping 64% surge from 13,199 units to 21,634 units. The premium segment typically comprises an average price per square feet of Rs 4,898 to Rs 5,876. On the other hand, the budget segment (average price of less than Rs 3,917 per square feet), which saw a 34% drop in new project launches since June 2020.

While H1 2021 has witnessed a growth in sales as compared to the corresponding period last year, when compared with H2 of 2020, sales have declined by 9%. Sales had bounced back to pre-Covid levels soon after the first wave; which was primarily driven by the two-tiered stamp duty-waiver extended by the state government, that incentivized new home buyers. However, the momentum slowed soon as the second wave hit.

"The Maharashtra government's initiative to reduce stamp duty has effectively increased sales. Also, in the RBI policy review where they reduced interest rates, reducing banks' home loan interest rates served the customer with a whole lot of benefits and real estate developers have seen sales accordingly. Irrespective of the ruling party, the city has witnessed tremendous development in all significant areas," said Goel said.

According to Vinit Dungarwal, Director, AMs Project Consultants, the pandemic also helped the real-estate ecosystem to press a refresh button and adopt technology in a big way.

"The industry has started harnessing technology in a big way. The site visits have been replaced by virtual tours. Additionally, contech (construction technology) is being used extensively to enable real estate companies to make better choices at the development stage and enable them to be environmentally conscious. The prop-tech tools are being used extensively for site management. Scheduling is another area where prop-tech is helping companies to avoid crowding and manage their workforce better," he added.

Way Forward

To accelerate the demand in the current times, Anil Pharande, Chairman - Pharande Spaces suggested that the government should further extend the stamp duty benefit, address the issue of exorbitant rise of raw materials costs, and also provide limited-time GST waiver & ITC benefit, and more tax incentives for first home buyers.

"As already mentioned, there is sufficient ‘real' demand, and the right combination of incentives - at the right time- can convert this demand into sales. Helping more hopeful citizens to realize their dream of homeownership is not a one-sided exercise - it is a win-win situation for everyone, including the government. The time to act is now. Neither housing loan interest rates nor property prices can remain at the current low rates indefinitely. Once interest rates and property prices inevitably begin to rise, this window of opportunity will close," Pharande said.

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