Pune: Unlike in Delhi-NCR (where residential real estate prices saw massive depreciation during the last two years) and Mumbai (which saw a marginal appreciation in the same period), Pune maintained its status as a safe residential realty investment destination. With assured returns on houses at a constant rate of year-on-year appreciation, Pune has been a favourite location with investors who are averse to high risks.
Although the city continues to see growth in capital value appreciation, the rate of appreciation has declined marginally over the last two years. This trend was seen across most locations in Pune. Only a few areas of Hinjewadi, which saw new launches, witnessed growth in appreciation.
Overall, demand as well as the number of residential project launches reduced in 2014. It also emerged that the city is a largely mid-segment market when it comes to residential property. The ‘sweet spot’ for buyers in this segment lies between Rs 4,500 and Rs 5,200 per square feet (psf). In other words, a 1,000 sqft flat costing about Rs 50 lakh forms the median ticket size in the city.
Pune’s ‘mid-segment market’ categorization also stems from the fact that most buyers prefer to book houses in the pre-launch stage, especially at rates around Rs 4,600 psf. Sales went down in projects located in and around suburban Hinjewadi once a price level of Rs 5,500 psf was reached. Interestingly, township projects are in great demand with buyers and investors – but here too, buyers prefer to book properties during the pre-launch stages.
Another reason behind this reduced demand in projects that crossed the ‘sweet spot’ budget range was the limited number of choices available for prospective customers after more than half the bookings have been made in a project. Invariably, it is buyers who are in a hurry to move in their new flats who buy in such a scenario. Prices for ready-to-move-in properties in projects meant for mid-segment buyers are generally in the range of Rs 5,800-6,500 psf.
To enhance slowing sales and entice more mid-segment buyers, developers have launched offers like the 20:80 and 40:60 schemes, especially during the festive season. Such offers have been popular with many Mumbai developers, but were not available to buyers in Pune until some months ago. Developers had tried to entice the luxury or upper-segment buyers into some projects, but did not elicit an encouraging response.
Buyer who have been waiting for prices to go down in the Pune realty market are waiting in vain. However, they are definitely able negotiate on the prices in the current scenario, with the negotiation bandwidth depending on the location of a project and the inventory levels of the developer.
The current inventory level stands at 16 months, which is slightly higher than the last six year’s quarterly average of 15 months. This is a very healthy figure, and reflects demand-supply equilibrium. For buyers, this means that once the right price point and overall ticket size as well as the location matches the requirements, it is advisable to go ahead with the purchase.
The average capital value appreciation rate in Pune is projected to be in the range of 12-15% for the year ahead.
Areas that will see maximum appreciation:
• Hinjewadi, Marunji Road and its surrounding areas will see the best appreciation in the next one-two years
• Kharadi and nearby areas.
Reasons: Employment opportunities (mostly IT/ITes) as well as office stock coming up, infrastructure growing and quality housing projects expected to be launched in the above sub-markets. This will push up the capital values here.
Authored by Sanjay Bajaj, Managing Director – Pune, JLL India
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