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Maharashtra's cultural capital- Pune is also one of the most progressive and fastest-growing cities in India. The rapid growth of its industrial sector has made Pune one of the prime hot spots of recent times. For many investors, this city has proved to be one of the most profitable and viable locations to invest in residential real estate.
Looking at the year gone by 2022, despite the pandemic where the overall residential sector showed signs of slowdown, Pune's real estate market thrived. Challenging conditions like the property rate hike, higher rentals, stamp duty, rise in the interest rates, could not deter the sentiments of consumers investing and buying homes in Pune. Many developers encouraged home buying experience by offering attractive payment plans and waving off the stamp duty and GST. Post pandemic, corporates invited their employees back to office due to which the demand for rental housing has seen a sharp surge. The hybrid working model prompted homebuyers to look out for extra space. Some of these factors made real estate investment attractive in Pune.
REAL ESTATE LOCATIONS WITH INVESTMENT POTENTIAL
Rohit Gera - MD, Gera Developments Pvt. Ltd. says. "Offices are the key to the rise in residential demand in the cities because office space leads to jobs, and where there are jobs, people want to live nearby.Residential properties near office spaces are attractive real estate locations with investment potential."
Subhash Goel- MD, Goel Ganga Development is of the view that Pune is an excellent place to live and it is challenging to forecast which individual areas of Pune would have the most significant investment opportunity in 2023. "Wagholi, Kalyani Nagar, Mundhwa, Hadapsar, Kharadi IT Park, Undri, Jambhulwadi, Fursungi, Yevlewadi are some of the hopeful contenders in the hunt for inexpensive homes to serve the city's expanding population of millennials and young professionals and also the reason for its rapid growth. “
Sachin Bhandari Executive Director and CEO, VTP Realty observes, “While Pune has been a very mature and stable real estate market, the Western parts of the city are seeing massive growth and continual infusion of new inventory month on month. The entire city is a magnet for investments as many different factors come into play when zeroing in on a location. The northern and eastern belt are manufacturing, auto and warehouse hubs while the western side is favoured by many from a proximity to the IT hub or Mumbai or Bangalore is concerned.”
The most emerging investment location in the Western belt of Pune is Baner according to Vishal Jumani, Joint Managing Director, Supreme Universal, because of the expressway and close proximity to Mumbai plus high demand and better infrastructure development. “Second to none is the Mundhwa region, owing to the commercial development planned around that belt and its vicinity to uptown areas like Kalyani Nagar, Koregaon Park, and IT hubs of Magarpatta and Kharadi.”
“Locations in the western part of Pune including Hinjawadi, Bavdhan, Baner, Kiwale-Mamurdi Road, Pimple Nilakh and Kharadi, Nagar Road in east Pune, are some of the key regions which have fared well in the last two years and will continue to grow in the years to come. Residential prices range from Rs. 5,000 to Rs. 11,000 per sq foot. The affordable and middle-income categories account for the majority of the demand in this region. Many IT and ITES businesses have offices in Hinjewadi's multiple IT parks. Non-IT firms with corporate headquarters in the region include banking and financial services, manufacturing, and pharmaceuticals. As a result, an exponential residential real estate opportunity is witnessed in the nearby regions addressing the residential demand of home buyers within the region,” explains Rahul Talele, Group CEO, Kolte-Patil Developers Limited.
For Siddharth Vasudevan Moorthy - Managing Director, Vascon, both east and west Pune has good potential. “Location like Kharadi, Wagholi, Kalyani Nagar in the east will see higher opportunity whereas in the west Pune Baner, Pashan & Wakad will see high investment potential opinions.”
Rohan Pawar, CEO, Pinnacle Group, notes, “The year 2022 has proven to be favorable for the real estate markets across the board, and the real estate market in Pune has not been an exception to this trend. After the pandemic, there has been a consistent rise in the demand for housing, and it shows no signs of abating any time soon. The festive season has also brought about increased activity in the residential real estate sector in Pune, which has resulted in an increase of 10–12% in property sales.”
“Locations in the western part of Pune including Hinjawadi, Bavdhan, Baner, Kiwale-Mamurdi Road, Pimple Nilakh and Kharadi, Nagar Road in east Pune, are some of the key regions which have fared well in the last two years and will continue to grow in the years to come. Residential prices range from Rs. 5,000 to Rs. 11,000 per sq foot. The affordable and middle-income categories account for the majority of the demand in this region. Many IT and ITES businesses have offices in Hinjewadi's multiple IT parks. Non-IT firms with corporate headquarters in the region include banking and financial services, manufacturing, and pharmaceuticals. As a result, an exponential residential real estate opportunity is witnessed in the nearby regions addressing the residential demand of home buyers within the region,” explains Rahul Talele, Group CEO, Kolte-Patil Developers Limited.
For Siddharth Vasudevan Moorthy - Managing Director, Vascon, both east and west Pune has good potential. “Location like Kharadi, Wagholi, Kalyani Nagar in the east will see higher opportunity whereas in the west Pune Baner, Pashan & Wakad will see high investment potential opinions.”
Rohan Pawar, CEO, Pinnacle Group, notes, “The year 2022 has proven to be favorable for the real estate markets across the board, and the real estate market in Pune has not been an exception to this trend. After the pandemic, there has been a consistent rise in the demand for housing, and it shows no signs of abating any time soon. The festive season has also brought about increased activity in the residential real estate sector in Pune, which has resulted in an increase of 10–12% in property sales.”
IMPACT OF INFLATION & INTEREST RATE HIKE
Rahul Talele observes, the demand for residential real estate has reached an all-time high as a result of the realignment of priorities prior to and after the pandemic. “The demand for housing in Pune has remained robust despite the increase in interest rates. Since income growth has outpaced property price growth, affordability is high, assisting the residential market in maintaining its momentum. Property sales in Pune have increased as a result of the recent festive season, as well as the reopening of offices and increased leasing activity after the pandemic. The region's residential demand and sales received a much-needed boost from the affordability factor and interest rates that were lower than those experienced prior to the pandemic.”
While Vishal Jumani is of the opinion, “Inflation to a certain extent affects buyers of affordable housing. Luxury clients are impacted less by rising inflation. With the home loan rates going up affordability has gone up. Salaries have gone up. Owing to the factors mentioned we haven’t seen any resistance from the buyer’s side. The price rise was due to the cost of material and labour taking a steep jump. Also, land prices have been increasing during post-pandemic there was a sudden up rise in demand. But Pune as a city will have a constant supply of residential space which will keep the prices in control. A word of advice “If someone needs to buy, now is the right time”.
“Real estate, unlike rice or gasoline, does not respond rapidly to inflationary tendencies. Nonetheless, it is widely acknowledged that inflation has a detrimental impact on property prices,” remarks Subhash Goel.
When property prices rise, it can make it more expensive for home buyers to buy, especially if they want to believe in a desirable or in-demand neighbourhood. If interest rates rise, home buyers may find it more expensive and difficult to borrow money to buy a property. Higher home loan rates and property prices will influence housing demand.
“Although the interest rate environment did have an impact on demand as a result of further repo rate hikes, the impact is viewed as fleeting and short-term at best asserts. In addition to this, increased input costs led to an increase in the purchase price of the property, which is up by almost 10% in some locations. In order to alleviate some of the stress that is being felt by customers, developers have been offering a variety of discounts and price reductions, in addition to improved facilities, in upcoming developments. The demand for large homes with clearly defined work areas, which arose as a result of the pandemic, as well as the subsequent trend of working from home, is still strong, with many businesses continuing to use hybrid work models,” states Rohan Pawar.
However, Sachin Bhandari says it is difficult to predict when and to what extent these factors will impact demand. “We observe that these factors only cause a marginal or temporary depression in the overall demand. Fluctuations in the economy and interest rates are common and home buyers rarely time their purchases based on these attributes. They may fuel a home-buying decision but are no longer the main drivers of the growth for this industry.”
RETAIL REAL ESTATE GROWTH POTENTIAL
Pune is a city in the western Indian state of Maharashtra that has seen rapid growth in recent years, making it an attractive location for retail real estate investment.
Rahul Talele elaborating on a recent industry survey says, ”Pune reported approximately 140,000 sq. ft. of leasing in the third quarter of 2022, a 43% rise year on year and an 8X increase over the same period last year. Retail developers anticipate that many foreign businesses will continue to regard India as a rising market due to its high expansion potential. Mall commerce has already exceeded pre-pandemic levels and leading operators are re-negotiating rents and seeking a bigger share of the revenue from retailers and brands. They are also open to shorter lease terms, allowing them to change the tenant mix as retailers are prepared to pay a higher premium as a result of an increase in commerce. Positive sentiments pervade the retail business and the current leasing pattern reflects the industry's steady growth rate.”
"The inflation may impact spending patterns but the retail industry has been adept at handling these twists and their multi-channel sales strategies have led to lower customer acquisition costs and also lower operational costs. Online sales and Direct sales are also becoming very popular," observes Sachin Bhandari. He adds, "This trend does not make much difference to the real estate market as such because the omnichannel experience attracts additional sales over and above the brick-and-mortar stores. Large retailers are looking at smaller format flagship stores but more in number and dotted across many locations to reach their customers at their doorstep."
Siddharth Vasudevan Moorthy asserts, “The market always balances itself out with the rising/falling demand-supply graph. We do not predominantly see dramatic highs and lows like in bigger cities like Mumbai, Delhi, Bangalore, etc. This has a significant impact on decision-making and makes the market predictable which helps businesses manage growth and expansion plans.”
Vishal Jumani mentions, “As the cities grow steadily and seeing the way urbanisation has taken place in the last few years, the demand for retail also goes up. New micro markets require new retail, restaurants, cafés, daily necessities, supermarkets, banks, etc. High street retail will also see a lot of growth and will be needed to cater to the people living in the neighbourhood. 2023 will have a high demand for commercial spaces. There are plethora of deals taking place for commercial developments. Pune is still a better and cheaper option. Minor blips might arise due to a slight slowdown in the US and UK, but long term I see no problem at all.”
Rohit Gera affirms, “The office will continue to do well. There is an office demand but again there's a global uncertainty looming but demand seems robust. Commercially things look good and retail continues to do well.”
CURRENT & PLANNED INFRASTRUCTURE DEVELOPMENT
Rohit Gera says the metro coming in Pune, is helping in decongesting the traffic and the higher densification. ”Our cities have done exceedingly well in providing infrastructure; some may say this infrastructure is horrible but given the fact that we have shortage of capital, the city has done a good job in keeping up with the infrastructure and population. “
Subhash Goel mentions. “Infrastructure development has the potential to improve connectivity, provide access to amenities, and spur economic growth. However, it can also have negative consequences such as increased traffic and pollution, community dislocation and financial expenditures. Infrastructure development can be expensive and the financial burden of funding these projects may rest on taxpayers or be given to consumers through higher prices for goods and services.”
“The infra projects are underway and plans are going to help connectivity which will improve demand in the
tirelessly to improve the network of roads and the newly developing suburbs are being designed with much wider and well-designed roads, subways, and flyover networks. But the slow pace of infra works results in chaos and traffic snarls giving rise to longer drive times even for shorter distances. This is part and parcel of a rapidly growing city landscape. However, speed is of the essence in infrastructure development. Early and quick identification of bottlenecks and pace of the actual execution must be much faster so it causes minimal disruption of day-to-day life of the citizens,” avers Sachin Bhandari.
WISHLIST FOR THE YEAR 2023
While, year 2023 is predicted to be a good year for outskirts, “tells Siddharth Vasudevan Moorthy.
“The upcoming metro lines, enhanced intra-city connectivity, Pune Ring Road, planned road network development and projected airport are all major growth drivers for the city of Pune. These factors have boosted residential demand in the city's outskirts. When many other cities are still dealing with public infrastructural challenges, Pune's market exhibits opportunities with planned developments. As a result, the residential market has seen an average monthly rent increase by 10% in micro-markets,” states Rahul Talele.
Pune is undergoing a major overhaul of sorts with large-scale Metro line development. While it is a challenge for the residents during the actual construction work but once completed the metro has the potential to reduce the traffic on the roads.
“Both the PMC, PCMC, and PMRDA are working
real estate in Pune. Economic conditions, demographic changes, and infrastructure development can all impact real estate markets. Government rules and regulations can also impact the retail real estate market.
Rohit Gera says if we continue in stable environment things are great. “As far as the budget is concerned, I wish the government raises the income tax deduction for the interest paid for home loans. The government needs to make things easy for people to buy homes and if they do that, it will continue to help bring tailwinds as far as the real estate sector is concerned.”
Rohan Pawar says, “The new year that has just begun will be beneficial for the real estate industry in Pune. Demand will be supported as a result of the numerous infrastructure projects that are currently being carried out in the city, as well as those that are currently being planned. The on-time completion of infrastructure projects will be the key and it will continue to be essential for demand to remain stable. It is anticipated that the city will continue to practice quality construction while also providing consumers with better homes and, as a result, greater value. The increase in repo rates will have a moderate effect on demand in the entry-level housing market because buyers will only delay their home purchase rather than abandon the process entirely. Customers in the mid-range and premium price points, on the other hand, are expected to be less affected. Composite housing complexes or gated community projects are quickly gaining appeal, which is a trend that is currently being noticed. This is especially true in the aftermath of COVID. Summing up Pune will continue to experience housing demand growth in 2023.”
Rahul Talele adds, “Furthermore, large IT companies are looking out for Grade A spaces and are also willing to pay higher premiums for it to meet ESG and SDG goals. E-commerce and third-party logistics businesses will continue to fund warehousing as digital penetration rises, strengthening the warehousing market and making it one of the fastest-growing commercial real estate markets in 2023. Hybrid work will sustain many employees now demanding for top-tier and comfortable office space as a price for leaving the pleasures of working from home. With that, the disparity between high- and low-quality commercial assets will also increase. As a result, office owners will upgrade their aging assets either by retrofitting new amenities to match the demand or by developing a greenfield Grade A project, keeping employee centricity at the forefront.”
For Vishal Jumani, his wishlist is very simple. “Better Infrastructure – Well-planned and clean surroundings, faster metro connectivity, meticulous safety measures to be taken care of in any new neighbourhood. Good education and Supreme institutions so that there is a good amount of talent available which attracts companies to set up their offices in the vicinity. Government should attract companies to set up their manufacturing hubs because that will really drive the demand.”
Siddharth Vasudevan Moorthy says 2023 will be a new emerging year with lots of scopes and opportunities and the wish list for the New Year for Pune's real estate sector is - “Our love and experience for this industry make us want to push our boundaries, innovate, and take up unique projects. I wish the same passion to be continued this year as well as further consecutive years as well.”
Sachin Bhandari, says, “We think commercial properties are now seeing a renewed interest as new breed of secondary investors is on the rise. Earlier there were more institutional buyers or serial investors. Now there is a rise in the salaried class or entrepreneurial retail investors who look at commercial properties as a potential investment as the returns are much higher than residential as an asset class. There is an increased demand for pre-leased inventory rather than strata sales. With the fractional investing becoming more mainstream we believe high-quality branded commercial real estate will thrive. Input credit on GST must be reinstated. The new GST scheme has increased the cost of production by up to Rs 400-500 which has to be borne by the end consumer.
Secondly, lowering the stamp duty for the benefit of the customers. Metro cess also creates an extra burden on them. As it is the taxes are very high. Any extra burden on the customer will directly impact demand. On the whole real estate is a highly risky business governed by volatile dynamics and any step toward stabilization will help. “
Addressing some of the shortcomings such as the increasing interest rates will temporarily impact the growth momentum of the Pune residential market. Infrastructure projects, particularly those involving land acquisition can often result in the removal of communities. Urbanization will accelerate, putting considerable strain on infrastructure. Polluted waterways, unequal water distribution and poorly managed sewage treatment infrastructure are reasons for concern. The year 2023 may see new launches well under control where ready-to-move-in homes will continue to dominate buyer demand, but new launches will also gain traction. The demand for affordable housing will sustain in 2023 as well.
“THE YEAR 2023 IS PROJECTED TO BREAK SEVERAL EXISTING PUNE HOUSING MARKET RECORDS AND SET ADDITIONAL BENCHMARKS IN TERMS OF PROJECTS, LOCALITY, NEIGHBOURHOOD, CONFIGURATION, AMENITIES, INFRASTRUCTURE AND CONNECTIVITY. OVERALL, IN 2023, PUNE’S HOUSING MARKET WILL SEE A STRONG THRUST ON AFFORDABLE HOUSING ALONG WITH PROJECTS THAT FOCUS ON SAFETY, SECURITY, CONVENIENCE, AND A HEALTHY LIFESTYLE.” -SUBHASH GOEL
“THERE WILL BE A SIGNIFICANT SURGE IN THE DEMAND FOR NEW-AGE FLEXIBLE WORKSPACES, ESPECIALLY FROM IT AND RETAIL BUSINESSES AS INDIA IS ONE OF THE BIGGEST IT HUBS GLOBALLY WITH CONSISTENT INNOVATIONS. OVERALL, THE GROWTH ACHIEVED IN 2022 HAS CREATED A STRONG BUSINESS ROADMAP FOR COMMERCIAL REAL ESTATE IN 2023, ESPECIALLY FOR GRADE A OFFICE SPACES, WHICH WILL CONTINUE TO CONTRIBUTE TO THE COUNTRY'S ECONOMIC GROWTH.” - RAHUL TALELE
“THE ENTIRE STRETCH OF THE PUNE-BANGALORE HIGHWAY ON BOTH SIDES IN PUNE WEST IS A MAGNET FOR A FLURRY OF PROJECTS. KHARADI IN THE EASTERN BELT IS BLOOMING INTO A PREMIUM LOCATION WITH HIGH-END RESIDENTIAL AS WELL AS COMMERCIAL AND IT WORKSPACES. THE CITY WILL CONTINUE TO ATTRACT INVESTMENT IN 2023 AS WELL. THE STRONG IMPETUS THE INDUSTRY HAS SEEN FUELLED BY THE POST-COVID CONSUMER DEMAND SURGE WILL CONTINUE TO PAN OUT. MAHALUNGE, BHUGAON, TATHAWADE, KHARADI, AND DHANORI ARE SOME OF THE LOCATIONS WE BELIEVE WILL CONTINUE TO SEE STRONG DEMAND.” -SACHIN BHANDARI
“THE CITY'S FLOURISHING ECONOMY, GOOD INFRASTRUCTURE, SOCIAL DEMAND FOR RETAIL SPACE, AND BIG SKILLED WORKFORCE HAVE DRAWN NUMEROUS FIRMS AND INDIVIDUALS TO THE REGION. WITH THE RISE OF MANY IT MAJORS AND OTHER GLOBAL CORPORATIONS, PUNE CITY HAS SEEN MORE MIGRATORY PEOPLE OUTSIDE THE CITY DUE TO PLENTIFUL WORK OPPORTUNITIES. OVERALL, PUNE MAY PROVIDE GOOD DEVELOPMENT OPPORTUNITIES FOR RETAIL REAL ESTATE INVESTORS, PARTICULARLY THOSE SEEKING TO INVEST IN A CITY WITH A BOOMING ECONOMY AND HIGH DEMAND FOR RETAIL SPACE.” -VISHAL JUMANI
“MARKETS ARE GOOD. DEMAND IS ROBUST AND STRONG. THE GOVERNMENT NEEDS TO MAKE SURE THAT THE HEADWINDS DON’T PUSH US UNDER AND FOR THAT IF THEY COME UP WITH SOME BENEFITS TO THE CONSUMERS, THEY WILL CONTINUE TO BUY HOMES. COMMERCIAL REAL-ESTATE DEMAND IS STRONG. THINGS ARE LOOKING GOOD RIGHT NOW BUT AGAIN GLOBAL UNCERTAINTY IS ONE DANGLING SWORD FOR EVERYONE.” -ROHIT GERA
“NO MATTER WHAT YOUR BUDGET IS OR WHAT KIND OF HOME YOU'RE LOOKING FOR, YOU'LL FIND IT IN PUNE. THERE ARE A NUMBER OF UP-AND-COMING AREAS WITHIN AND AROUND THE CITY, AS WELL AS NEARBY PIMPRI-CHINCHWAD, WHICH IS THE CITY'S TWIN. EVEN WITH REDEVELOPMENT PROJECTS, THERE IS A GOOD CHANCE THAT THE INVESTMENT WILL BE SATISFACTORY.” -ROHAN PAWAR
“THE BEAUTY OF OUR CITY IS THAT EVEN THOUGH THERE ARE CHANGES, WE ARE STILL A GROWING CITY. WITH HIGH-FUNCTIONING INDUSTRIES RUNNING SUCH AS AUTOMOBILES, EDUCATION, FMCG, IT, AND THE GLAMOROUS FASHION INDUSTRY, REAL ESTATE IN PUNE IS ALWAYS A SECURED INVESTMENT.” -SIDDHARTH VASUDEVAN MOORTHY
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