Pune Real Estate Outlook

The Pune residential market has been witnessing a downward trend in terms of demand for homes since the beginning of 2013, and this momentum seems to have continued in 2014 as well. While the demand for homes dropped by over 19% in 2013, it is expected to fall by 11% in 2014. The total number of units to be absorbed is expected to fall from 38,800 in 2013 to 34,500 in 2014. However, a fall in absorption is expected to be complemented by a sharper drop in the number of new launches during the year. New launches are estimated to decrease by 21% from 45,370 units in 2013 to 35,840 units in 2014.

Comparing the absolute numbers of absorption and new launches on an annual basis is not sufficient to understand the health of a market or its impact on price. Since demand and supply are influenced by various other independent factors, such as economic growth, market sentiment, interest rate and income growth, among others, an annual rise or fall in demand and supply could be misinterpreted as a sign of a strong or weak market. Hence, with the aim of removing seasonality from the data, we have analysed the long-term moving average (eight quarters) trend in absorption and new launches.

The following chart clearly indicates a falling trend in both absorption and launches since June 2012. Interestingly, the rate of fall in new launches is far greater than the fall in absorption since December 2013. The correction in the market has been led primarily by developers who have refrained from launching new projects during the last six months after witnessing a decelerating trend in sales volumes for over two years in a row. While the analysis of absorption and new launches could provide a fair idea with respect to the traction being witnessed in the market, the impact on price cannot be understood without studying the unsold inventory available in the Pune city.

Micro-market Analysis Pune

The Pune residential market can be broadly classified into five micro-markets, with locations within each micro-market sharing similar characteristics in terms of price, quality of projects, buyer segment, infrastructure development and distance from the city centre.

Micro - Markets        Pune Real Estate Locations
    Central                    Koregaon Park, Boat Club Road, Erandwane, Deccan, Kothrud.
     East                       Viman Nagar, Kharadi, Wagholi, Hadapsar, Dhanori.
     West                      Aundh, Baner, Wakad, Hinjewadi, Bavdhan, Pashan.
     North                      Pimpri, Chinchwad, Moshi, Chikhali, Chakan, Talegaon.
     South                     Kondhwa, Ambegaon, Undri, Dhayari, Warje, Sinhgad Road.

The residential market of Pune is fairly divided across the four zones (north, south, east and west) in terms of launches and absorption, with the exception of central Pune. During H1 2014, central Pune accounted for only 1% of the total new launches, as unaffordable prices, high unsold inventory and unavailability of vacant land deterred developers from launching new projects.

Therefore, the focus of our analysis has been limited primarily to the other four micro-markets of the city. Some of the prominent projects recently launched in Pune are Oxy Gold, Oxy Primo, Oxy Ultima, Oxy Valley, Oxy Galaxy  by Venkatesh Oxy Group in Wagholi.

We expect the sales volume to recover from H2 2014 onwards,  after a lull of more than two years. It is forecasted to increase by 35% to 19,800 units in H2 2014, compared to H1 2014. Similarly, it is estimated to increase by 11% from H2 2013

Key Take aways To Buy Flat in Pune

The demand for homes in Pune is expected to decrease from 38,800 units in 2013 to 34,500 units in 2014 resulting in a fall of 11%. However, a fall in absorption is expected to be complemented by a sharper drop in the number of new launches that are estimated to decrease by 21% from 45,370 units to 35,840 units during the same period.

We expect the sales volume to recover from H2 2014 onwards, after a lull of more than two years. It is forecasted to increase by 11% to 19,800 units in H2 2014, compared to H2 2013. The QTS ratio has been inching upwards since September 2013, signifying weakness in the market.

South Pune is slowly emerging as a preferred destination for home buyers in Pune due to its strategic location between the two major IT/ITeS employment hubs of Hinjewadi in the west and Kharadi in the east, with areas like Kondhwa, Ambegaon, Undri and Dhayari equidistance from both.

West Pune observed the sharpest fall in new launches during H1 2014, as developers curtailed launching fresh projects on the back of lacklustre demand and poor response received by the various projects launched during H2 2013.

South Pune’s health is the poorest, as it continues to carry the excess unsold inventory of projects that were launched more than two years ago. This problem has been compounded by the sharp increase in new launches during H1 2014. The bumpy ride in demand and supply does not seem to have any significant impact on price levels.

Affordable Housing In Pune

The objective of creating affordable housing is to provide adequate shelter to all. Creation of affordable housing should encompass both – enabling people to buy and to rent, for which there is a need to put an institutional structure in place. The present models on which affordable housing is being created concentrate on the ability of people to buy. These models require a myriad of agencies from public and private sectors to work together for the development of affordable housing. Private sector, which comprises residential developers, develop affordable housing projects and sell them in the open market. Government agencies such as Urban Local Bodies (ULBs) and Urban Development Departments (UDDs) are responsible for laying down guidelines and bylaws for affordable housing.

Certain restrictions imposed by Ministry of Environment and Forests limit the use of land in urban areas for housing purposes, resulting in the lack of supply of land and thus higher pricing. RBI regulates monetary policies that affect interest rates, which has a major impact on the ability of home buyers to purchase houses. People who look to buy houses in urban areas are mainly those who have been in the city for a considerable amount of time and require new houses due to growing family size. Thus, this model addresses only a part of the target segment that needs affordable homes. Also, by using this model, there is no guarantee that the beneficiaries of such projects are the actual needy people or speculative investors.

Home Buying Decision

The study facilitates real estate developers to think of preferences and choices of consumers related to Home buying decision (i.e Flats & Resident Villas). The increased competition in the housing finance sector has revolted in easier loans at lower rates of interest. Promoting grand real estate project is not easy as it looks. It calls for considerable professional expertise and exposure to the field.
Objectives:

• The study and analyze factors influencing the home buying decision.
• To evaluate professional services preferred by the flat buying customers.
• To analyze various promotional techniques of real estate developers.

Why Buying a Home is a good idea:

• Income Tax Savings -  All of the interest and property taxes customers pay in a given year can be deducted from their gross income to reduce their taxable income.
• Stable monthly housing costs - When customers rent a house to live, they can certainly expect their rent to increase each year or even more after. If customers get a fixed rate when they buy a home they have the same monthly payment amount for thirty years.
• Forced Savings - Some customers are just loosy at saving money, and house is an automatic savings account.
• Freedom & Individualism - When customers rent, they are normally limited on what they can do to improve their home. They have to get permission to make certain types of improvements.