Pune: In Pune city 58% localities saw an average price increase of 4.6% while the balance 42% localities saw price drop of 3.9%, in the Oct-Dec 2015 quarter
i. The secondary/resale market in Pune had a mixed quarter with some localities witnessing price increase while others noted a price decline. This was reflected in the City Index for secondary/resale market which witnessed an increment of only 1.8% in Q3FY2015. The Index captures the weighted average price movement in the secondary/resale market across 92 prominent localities of the city
ii. There was an average decline of 1% in prices across 8 identified budget segments in the city as a percentage drop in some budget segments was more than the marginal increment in others. The premium segment of Rs 10,000-12,000 per sq ft and >Rs 12,000 per sq ft budget range had a difficult quarter with an average price decline of 5% in values. The entry level budget segments of Rs 3,000-5,000 per sq ft range also witnessed a 1% decline in prices
iii. The largest decline in prices was in the luxury segment of the city in the >Rs 12,000 per sq ft budget with a 6% drop in values
iv. Overall, the market remained weak in the last quarter as prices across all budget segments either saw a negligible gain or drop in values
b. Historic Market Performance:
i. The long term assessment of the City Index over 9 quarters (Jul-Sep 2013 to Oct-Dec 2015) shows that the Pune realty market has remained weak with only negligible price movement. This translated into a 9.8% increment in the City Index over two years. Benchmarking the Index gain during this period with inflation shows that the increment is not sufficient to beat the inflation trend in the market. This points towards a ‘time correction’ in property prices. In real terms, properties on an average, cost less than the prices prevalent two years earlier
ii. At an individual budget level, the price increase over a two-year period was subdued across the budget segment. The average price increment over 2+ years across the 8 budget segments was only 8.1%. The price increment ranged from low of 0.7% for high end budget segments in the >Rs 12,000 per sq ft range to high of 13.3% for the Rs 7,000-8,000 per sq ft price bracket. The entry level budget segment in the Rs 3,000-4,000 per sq ft range saw a 11.5% price increment during the period
iii. The two-year trend shows that mid-budget segments of Rs 5,000-8,000 per sq ft budget range have had the highest price movement. The average price increase in this segment was 12.1%. The premium segments of Rs 10,000-12,000 per sq ft and >Rs 12,000 per sq ft bracket had the least price gain with prices remaining practically stagnant
iv. While the price movement over the two-year period has been positive, these increments point to stagnant market with lack of underlying transaction activity
v. The market conditions over the last one year (Oct-Dec 2014 to Oct-Dec 2015) have remained equally unfavourable with only 3.4% increment in the Pune City Index
vi. This lacklustre increment in the City Index was because the average increment across the 8 major budget segments over the last one year was only 3.2%
c. Lack of Consumer Confidence:
i. Analysis across 92 localities in Pune shows that on an average, RM properties were 1.2% more expensive than UC properties in the Oct-Dec 2015 period
ii. While the weighted average price of RM properties was Rs 6,667 per sq ft, the same number for UC properties was Rs 6,586 per sq ft, representing a 1.2% difference in prices
iii. The two-year trend shows that UC properties have been at a premium and trend reversal has happened over the last two quarters (including Oct-Dec 2015). This indicates that consumers are opting for RM properties as the delivery risk is low when compared to UC properties. This is a sign of lack of consumer confidence in project delivery
iv. The value of RM properties rose more than that of UC properties. RM properties posted a price increment of 11% over Sep 2013 to Dec 2015 period, while the price of UC properties increased by only 4.3% in the same period
d. Rental Yield & Affordability:
i. The rental values in Pune are lower as compared to the capital values, leading to relatively lower rental yields. Therefore, while the EMI/Rent ratio is high, consumers can bridge the gap and purchase within the same locality as the rent being paid is low
Speaking on the occasion, Ms Jayashree Kurup, Head of Content & Research, Magicbricks said, “Despite slow market conditions, there is ample demand, as is clear from the steady and consistent search volumes on Magicbricks. However, the demand is stronger for Ready-to-Move-in properties rather than Under-Construction properties, indicating the lack of consumer confidence. As a result, secondary market transactions have become the norm with consumers opting to pay a higher value to get immediately usable property.”
She added, “The handling of credibility issues regarding on time deliveries will regain that lost faith and win the confidence of homebuyers.”
About PropIndex: PropIndex is an indicator of price movement in the secondary real estate market of the city.
It reflects weighted average price movement across prominent localities in a city. The localities have been chosen using the twin criterion of share in overall consumer searches in the city as well as share of actively traded properties. The weight assigned to each locality is its share of consumer search in the city. This makes for a comprehensive Index which covers localities with high consumer preference as well as high number of actively traded properties in the secondary market.
PropIndex leverages the comprehensive & unique property listings and consumer property search data on Magicbricks. Magicbricks has a database of more than 1 million active property listings and 6 million plus property searches which allows to undertake a comprehensive analysis and gain critical market insights.
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