Despite the overall economic slowdown, several Indian cities showed the dynamism and resilience in the residential real estate market
Spokesperson: Mr. Tushad Dubash, Director, Duville Estates
While signs pointed towards the global economy moving into an overall slowdown, the Indian economy also saw a slowdown during the year 2019. The liquidity crunch, low sales and weak investor demand put a break in the real estate sector across the country. However, JLL in their recently released, City Momentum Index report highlighted several cities that continue to demonstrate significant dynamism, particularly in India which are once again dominating the Global top 20 cities. As these cities profit from economic reforms, business growth and infrastructure investment, the real estate industry too is playing a great role in helping to meet the urban challenges. As per JLL’s “India Real Estate Market Update 2019: Residential” the real estate sector, in spite of muted consumption trends, showed resilience with the residential sector across the top seven cities recording a growth of 6% y-o-y in the number of units sold in 2019, while the real estate market in Pune remained one of the best-performing in 2019.
Driven by strong office growth, Pune’s real estate market stayed optimistic due to the inward migration and development in infrastructure around the city. As the home buyers showed confidence in the ready to move-in homes, the city’s new launches dipped by 27% in 2019 on a y-o-y basis as the developers concentrated on continuing sales and clearing the unsold inventory in the middle of the subdued consumption and investment trends. 84% of the real estate projects launched in this quarter were in the affordable and mid-segment (up to INR 7.5 million). The North West submarket contributed 53% of new launches, with focus in areas such as Baner, Poonawale and Balewadi; while Wagholi and Kharadi, in the North Eastern submarket saw 36% of new launches. (Source: JLL - India Real Estate Market Update 2019: Residential)
The residential sales were mainly driven by projects nearing completion in the second half of the year and the North-East and North-West submarkets continued to contribute to more than 60% of the sales during the year. Due to the strong office market progression, the spike in residential segment in the city led to a decline in the unsold inventory by 11% even after an increase of 4% in the average prices per sq. ft. Some of the micro markets that have shown growth in terms of returns are Wagholi (6.56% CAGR) with absolute return of 28.95%, Keshavnagar (8.24% CAGR) with absolute return of 37.25%, Kharadi (8.62% CAGR) with absolute return of 39.22%. As Kharadi has shown a remarkable growth in terms of returns,
Riverdale located along the Mula Mutha River in Kharadi has grown at the rate of 15.09% CAGR delivering an absolute return of 75.47% since its launch in the last quarter of 2015.
The increase in sales and the improvement in the market sentiment is also due to the investment in infrastructure and those being made for the construction of metro rail links, new airport terminal and ring road. The new terminal being built on the eastern side of the existing Pune airport is about 40,000 sq. m which will ease air traffic thereby fulfilling growing demands of air passengers. Another new airport, ‘Chhatrapati Sambhaji Raje Airport’ is planned and will be constructed at Purandar Taluka covering 2,400 hectares will boost trade from Pune and neighboring districts to many parts of the world. The addition of new flyovers and roads like the city’s first outer ring road, New Kharadi - Shivane Riverside Road will enhance connectivity within the city and also with other cities. Additionally, the municipal corporation has sanctioned plans to create new IT parks in Kharadi, Aundh, Baner and Balewadi which are expected to develop approximately 10 million Sq. Ft. of IT park office space thus increasing the employment opportunities in the city. The construction of Pune Metro phase I led to a price appreciation of residential apartments on DP Road and Vidyapeeth Road. Similarly, commencement of construction of phase II of the project resulted in the rise of prices on Baner-Pashan Road and in the residential societies of Aundh.
Rise in the number of corporate occupants, skilled workforce, foreign direct investments (FDI) and road connectivity continue to drive residential demand in Pune. The city is also home to some of the most renowned names in the commercial & IT sector, educational institutes and the presence of some of the best brands in healthcare. Pune also benefits from popular social infrastructure that adds to the frolicsome prospects of the city. Infrastructural development is further giving rise to a very diverse socio-economic population set up of the city. In the coming days, the demand for residential property in Pune will attract more developers to embark on new residential projects, further boosting the prospects of the city to develop into a favored residential destination. The city is not only an education hub but also has access to social infrastructure that determine the quality of life like primary healthcare and multispecialty hospitals, malls and multiplexes, hotels and restaurants, recreational facilities like parks, zoo, theatres etc.
Among tier II cities in India, Pune is attracting a lot of institutional investors in the residential real estate markets showing an increase in investor confidence. The marginal recovery in the market sentiment hints that the homebuyers are attentively keeping a watch over the implementation of measures taken by the government to revive the sector. In the coming months, as the city sees infrastructural developments, the unsold inventory will further decrease and bring investors back in the market. Additionally, the stressed asset fund (AIF) of INR 250 billion which is created has been a positive measure in providing funds to stalled affordable housing projects. It is expected that this initiative will help the stalled projects around the areas driven by IT/ITes sector and ease the movement of infrastructural developments in the city that are one of the major growth drivers of the sector.