Published On: Wed, Oct 4th, 2017

Pune witnesses 26% drop in the new homes launched for sale in the first half of 2017: GERA Report

puneregionalplanBy Accommodation Times Bureau

Key Highlights of the report:
? Reduction in new launches – On a year on year comparison, the last 12 months has seen a
reduction of 19.7% in the total number of flats launched
? Reduction in sales – There has been a reduction of 16.01% in the offtake from Jan 2017 to
Jun 2017 as compared in Jan 2016 to Jun 2016
? Sales momentum has moved into the budget and value segments
? Price trend – The average residential property prices continued to decrease at an overall
level bringing the total drop in property prices since June 2016 to 4.01% in June 2017
? The PMC area saw a contraction in the market share from 29.58% down to 22.09% 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. A drop of 16% in 3 years. Factoring
in annual increments over the past 3 years, affordability of homes is very attractive today.
Pune, July 18, 2017: Gera Developments, pioneers of the real estate business and the award winning
creators of premium residential and commercial projects in Pune and Goa, today presented the Gera
Pune Residential Realty Report for the period January – June 2017. The report indicates that, the
headwinds of a slower market, combined with demonetization and RERA has had an impact on the
number of homes launched in Pune. On a year on year comparison 81,922 new homes were
launched in the last 12 months (July 16 to June 17) down from 1,02,036 homes launched in the
previous 12 month period (July 15 to June 16) thereby a reduction of 19.7% in the total number of
flats launched. The last 6 months alone has seen a drop of over 26% in the new homes launched for
sale down from 47,119 flats launched in the July to December 2016 to 34,803 flats launched in
January to June 2017. The premium plus segment witnessed 40% decrease in the new flats launched
in the last 6 months as compared to the previous period. This is followed by a near 37% 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.
Mr. Rohit Gera, Managing Director, Gera Developments while sharing his perspective on the
report said, “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. Demonetization, RERA & GST have all
been introduced in a short period between November 2016 to July 2017. While RERA is a result of
the collective misbehavior 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 post GST as impossible and eventually, a new metric may
emerge.
Projects have long gestation cycles and as a result, it takes time for developers to slow down the
launch of projects in response to the market conditions. The land acquisition and approval process
takes time and the reduced acquisition and plan approval eventually translates to lower project
launches. The rate of slowdown in new projects launched is more than the slowdown in the sales
offtake. The government’s push towards affordable housing seems to be taken up earnestly by
developers with new residential projects being launched at prices below the average market rate.
The share of PMRDA in new launches has reached an all-time high clearly indicating that the next
wave of development is happening outward. The unsold inventory has decreased which is a good
sign and indicates that developers are concentrating on speedy execution of projects. However,
offtake has also reduced as customers and developers adjust to the new regulatory changes. The
introduction of the real estate regulatory act and the GST will lead to a reduction in the number of
projects being launched in the next 6 months. This will lead to an improvement in the inventory
overhang.”
Overall sales have been impacted with the total offtake at 6.69% lower from sales of 92,546 units in
July 15 to June 16 down to the sale of 86,354 units in July 16 to June 17. On a half yearly basis,
offtake levels also indicate a stressful situation. Offtake in Jan 16 to Jun16 was 47704 units while
offtake in Jan17 to Jun17 is 40063 units – a drop of 16.01%. The drop in sales is consistent across all
sizes. While the total sales have dropped, the market share of the sub-600 sf category has increased
with approx. 1/4 th of the sales now coming from the sub 600 sf segment. Looking at the actual sales
volume it confirms the fact that sales momentum has moved into the budget and value segments.
The average size of the unsold inventory has steadily reduced from 1054 sf in June 14 to 940 sf in
June 17. The category of houses under 800 sf accounted for half of the overall market offtake in
Pune.
The average residential property prices continued to decrease at an overall level from Rs. 4900 per
sf. in December 2016 to Rs. 4786 per sf. in June 2017 – a further six monthly price drop of 2.33%,
bringing the total drop in property prices since June 2016 to 4.01% (from Rs. 4984 per sf. to Rs 4786
per sf). The same trend is seen in new phases of existing projects – the new phases were launched at
Rs. 4774 psf in H2 2016 as compared to Rs. 4510 psf in H1 2017 (the new phases of existing projects
are launched at 5.5% lesser rate in H1 2017 as compared to H2 2015).
Mr. Gera further commented on the price trend basis the Gera realty report, “This indicates 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 a correction in existing projects. In real terms, the
affordability has in-fact increased. Assuming a salary increase of 10% p.a., the same home buyer can
afford nearly 35% more now than they could afford in H2 2013. There is a lot of talk about home
purchases shifting to ready properties since RERA not being applicable on ready properties. The
likelihood of this happening is low for two reasons. First, the inventory available for sale of ready
homes is very low – While 86,354 units were sold in the last 12 months, there are only 8849 ready
homes available for sale. Clearly if demand shifts to ready homes, demand will far outstrip supply

leading to a price rise. Second, since developers will incur GST costs, if they cannot afford to bear
these costs & as a result they will pass this additional cost on as a price rise – something that will be
supported by the increased demand for ready properties.”
The gross value of the inventory for sale stands at Rs. 49,214 crores on Jun’17 as against the gross
value of Rs. 53,181 crores as on Dec’16, a reduction of 7.46%. This is on account of the reduction in
overall inventory for sale and prices over the same period.
The majority of new units launched (from new phases and new projects) have been in the PMRDA
region, which account for 65% of all new units launched. When comparing jurisdictions, over the last
24 months, the PMRDA has seen a huge increase in its market share from 51.10% to 55.38%. At the
same time, the PCMC has retained its share at approx. 21 to 22%. The entire gain in market share
for the PMRDA region has come from the PCMC area. The PMC area saw a contraction in the market
share from 26.42% down to 22.09% over the past 24 months. The prices in the PMC region are
above Rs.7000 per sf and the slowdown in this segment has affected the PMC areas the most.
CONCLUSION
RERA aims to bring in predictability for home-buyers and mandates a minimum level product
expectation for all the developers. This creates opportunities for developers to exceed these legally
mandated expectations. Previously, in the absence of any quantified expectations developers
competed on quality, delivery time’s trust, track record etc. All these aspects are now legally
mandated. The path left now for the large developers is to compete on softer aspects of home
buying like customer relationships, design, innovations etc or to compete on a pure commoditized
product. Developers that have a head start on these aspects and have already made investments in
these areas stand to benefit the most and are most likely to shore up their brands going forward.
Customers will continue to be driven by their need & budget in determining what to purchase but in
the post RERA phase, projects are likely to compete based on their relative brand strength and that
will increasingly play a focal purchasing decision criteria for customers.
As the new paradigm emerges, it is clear that developers are going to need to be highly compliant,
transparent and extremely well capitalized. This will mean many developers and most fly by night
operators will not be able to adhere to the stringent requirements that the customer today
demands. Hopefully, this will lead to a clean-up of the industry and eventually a change in the way
the real estate industry is looked at leading to the perception of the industry changing for the better.

Accommodationtimes Institute
Diploma In RERA Diploma In REE Accommodationtimes Institute

About the Author

-

Leave a comment







Subscribe