Pune

Treading it cautiously, Pune's real estate is readying for revival as recent reports indicate drop in new launches and prices with focus on small-sized units. Post RERA compliance and GST, realtors are developing a fresh orientation to boost sales.

Reckoned as one of the most bankable real estate destinations, Pune have never let its investor's down. Withstanding tough times and fluctuating economy, the city has also been coping with new administrative policies like demonetisation, Benami Transactions Bill, RERA and now GST. Nevertheless, the transitional stage had never been easy, and Pune is readying itself for revival. Recent reports have shown a mixed trend in Pune's real estate.

Gera Pune Residential Realty Report for January June 2017 says that Pune has witnessed 26 percent drop in new homes launched for sale in the first half of 2017 over the previous half year. The report indicates that the headwinds of a slower market, combined with demonetization and RERA, have had an impact on the number of homes launched in Pune. According to a year on year comparison, 81,922 new homes have been launched in the last 12 months (July 16 to June 17), substantially less when compared to 1,02,036 homes launched in the previous 12 month period (July 15 to June 16), thereby showing a reduction of 19.7 percent in the total number of flats launched.

The last six months alone have seen a drop of over 26 percent in new homes launched for sale -falling down from 47,119 flats, launched in the period from July to December 2016, to 34,803 flats, launched in January to June 2017. The premium plus segment witnessed 40 percent decrease in new flats launched in the last six months as compared to the previous six months. This is followed by a nearly 37 percent drop in new units launched in the premium segment. The budget and value segment are not spared either. Surprisingly, only the luxury segment has seen a small increase in number of units launched in the past 6 months.

The Gera report points out that the Pune Municipal Corporation (PMC) area saw a contraction in the market share from 29.58 percent down to 22.09 percent over the past 30 months. The cost of a home of average size at the average price was Rs 58.14 lakhs in June 2014. This cost has come down to Rs 48.83 lakhs in June 2017. There is a drop of 16 percent in the past three years.

Factoring in annual increments over these years, affordability of homes is very attractive today.

Rohit Gera, Managing Director, Gera Developments, says, "Never before, in the history of India's real estate industry, have so many industry changing events taken place in such a short period of time. Demonetisation, RERA and GST have all been introduced in a short period between November 2016 and July 2017. While RERA is a result of the collective misbehaviour of a large section of developers, the outcome of a highly regulated, transparent, delivery oriented law will be the increase in prices customers need to pay for this low risk environment. The question however is when will the demand-supply equation allow the prices to increase. The changes in measurement (carpet area and proportionate changes for common areas), combined with the new methods for charging for car parking, will render comparison of the pre-RERA-pre-GST with the post-RERA-postGST as impossible and eventually, a new metric may emerge."

On price rise, Gera says, "The average prices are declining on the whole, but this is on account of new inventory coming in at lower prices bringing the average down, rather than making a correction in existing projects. In real terms, the affordability has, in fact, increased. There is a lot of talk about home purchases shifting to ready properties, since RERA is not applicable on ready properties. Clearly, if demand shifts to ready homes, demand will far outstrip supply leading to a price rise. Since developers will incur GST costs, and if they are unable to bear these costs, they will pass this additional cost on as price rise something that will be supported by the increased demand for ready properties."

Knight Frank India's half-yearly report for 2017 says that after-effects of demonetisation, RERA compliance and unsold inventory are some of the major factors leading to a 9 percent dip in the launches in H1 2017.

Discounts, coupled with government's focus on affordable housing, have led to an increase of 11 percent in sales YoY in H1 2017. Unsold inventory levels have come down from the peak of 71,000 units in H1 2014. The Knight Frank report further finds out that the Pune weighted average price has stagnated at INR4,860 per sq ft for the last one year, implying no price growth for buyers of residential property.

Shantanu Mazumder, Director, Knight Frank India Pune, says, "The first two months of H1 2017 saw consumers and the industry as a whole grapple in the aftermath of de monetisation. However, with RERA in place on May 1, 2017, projects, whether new or on-going, have been barred till July 31, 2017 from advertising, marketing or selling without registration with RERA. With developers re-directing efforts from sales to RERA compliance, pace of launches was lower in this period. Sales have seen an upswing on the back of the government's focused attention to affordable housing segment, home loans being at their lowest since 2009 and developers offering freebies and discounts to attract demand. In office, transactions declined by 12 percent in H1 2017 YoY g due to headwinds faced by IT industry and shortage of relevant office supply for the city's largest occupier s segment."

On office market review for Q2, CBRE South Asia Report says that leasing activity in Pune was mainly concentrated in locations of Secondary Business District (SBD), followed by developments in Central Business District (CBD). Overall absorption in the city witnessed a marginal dip in Q2, 2017 as compared to Q1, 2017. Occupier preference to wards locating in new developments continued with primary leasing dominating transaction activity during the quarter. Occupiers from the ITITES sector led the quarterly leasing activity, followed by engineering and manufacturing firms.

Anshuman Magazine, chairman, CBRE, India & South-East Asia, says, "Despite a dip in our GDP numbers during the March 2017 quarter, India's office market has continued to witness sustained activity. With the implementation of several policies reforms underway, including GST and RERA, the fundamentals of the country remain strong. Infrastructure development across major cities, growing prominence of smaller cities for corporates and overall positive sentiment are providing a further boost to the office market, which has witnessed positive momentum over the past two years."