2016 was a year of landmark decisions for the Indian real estate industry, with the residential sector in particular witnessing concerted efforts by the Government to bring in transparency and boost consumer confidence. With the implementation of regulatory policies like the Real Estate Regulatory Act (RERA) and GST to provide a uniform and transparent taxation regime, 2017 has turned out to be quite positive so far. The green shoots of revival are now visible in India’s residential real estate sector.
This is heartening, as the realty sector was quite lackluster over the past two years, defined by low absorption levels and oversupply in many cities. However, the 2017 Union Budget and the recent deployment of pro-market regulatory policies such as GST and RERA have begun setting a positive momentum, with cities like Pune benefitting the most.
With its unique confluence of economic growth drivers and rapidly developing infrastructure, Pune’s real estate market has for long been performing much better than many other major cities. The city’s inclusion in the ‘100 Smart Cities’ list has now led to Pune gaining increased importance on the back of the implied infrastructure enhancements that this major Government program demands.
The MahaRERA Effect:
Simultaneously, the implementation of MahaRERA has caused a significant realignment of the market. In fact, the day on which RERA was officially deployed created visible ripples on the Pune residential property market. A majority of the project hoardings which previously occupied every nook and cranny of the city vanished, thanks to RERA’s strict stipulation that only duly registered projects could henceforth be advertised. Today, RERA registration numbers are prominently displayed on the new hoardings – a clear indicator that the city’s credible developers have taken this new Act to heart and are living up to it.
In the post-RERA era, new residential project launches in Pune have slowed down. The larger developers are focusing on completing ongoing projects and making them RERA-compliant; most of the smaller players in the unorganized segment are choosing different tactics to sustain in the market. They are either finding buyers for their land, integrating with big players through joint ventures or are trying to make their projects RERA-complaint.
Despite being one of the most active residential markets in Maharashtra, Pune’s real estate market did show declining growth in 2016. Launches reduced in the last few quarters of 2016 due to accumulated unsold inventory of 2015 and uncertainty about the impending regulatory changes. The unsold residential inventory in Pune stood at 41,000 units by end 2Q17.
Current Market Trends:
The effects of the generalized market slowdown across the country, combined with the effects of demonetization and RERA, certainly had an impact on Pune’s realty market. While the city’s residential property market is now displaying signs of returning interest by end-users, this momentum is defined by a lot of caution and indicates that growth will be gradually going forward.
At this stage of 2017, the city’s property market continues to be largely end-user driven, with speculative investors now accounting for only 10-15% of purchases, where they used to account for as much as 20-25% in 2010-11.
Affordable and mid-segment housing (in the price range of Rs. 3,500-6,000/sq.ft.) added more than 25,000 units to the Pune residential real estate market in 2H 2016-1H 2017. The fringe areas of Pirangut, Bhugaon, Wagholi, Dhanori, Hinjewadi and areas in close proximity to Hinjewadi saw the maximum demand on the back of lower ticket sizes coupled with good connectivity to the city’s primary IT hub. This trend will continue, with several more affordable and mid-segment projects likely to hit the market in these areas over the next 12-18 months.
Areas such as Dhanori, Wakad, Ravet, Undri-Pisoli, Hinjewadi and Wagholi are now witnessing significantly increased sales enquiries, and will remain among the preferred destinations for middle-income end-users in the short-to-mid-term. The response to newly-launched projects by strong, credible developers demonstrating RERA compliance is noteworthy, which in turn is encouraging developers to put maximum efforts during the launch process
With many new players having ventured into the affordable housing segment, the luxury homes segment is currently seeing stagnant prices, with limited demand and supply. Demand in this segment is likely to pick up significantly only after 18-24 months.
After the undoubtedly dampening effects of the demonetization move in late 2016, Pune’s property sector retained its status of being one of the country’s most stable and reliable residential markets. With various major infrastructure projects underway or on the charts, the city will soon experience vastly accelerated momentum in terms of real estate development:
In 2016, Pune remained a buyers’ market and primarily end-user driven. Developers vied with each other for customers in most locations – a ‘competition’ in which only those with projects nearing completion emerged as clear winners. High buyer caution prevailed throughout the year with regards to under-construction projects in the earliest stages of development. In 2017, sentiment on the Pune’s residential property market will remain positive, and fringe areas that offer better affordability and returns on investment will pick up.
Authored By: Sanjay Bajaj, Managing Director – Pune, JLL India
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