Anil Pharande, Chairman, Pharande Spaces
Accommodation Times News Service
As the new year dawns, India’s real estate market has begun navigating the potentially choppy seas of 2017 with a lot of uncertainty. When it comes to the past year, it is safe to say that nothing went as anticipated for the property market. The hoped- for recovery in the residential sector did not happen, and the Government’s unexpected demonetisation move in early November put paid to any chances for a last-minute turnaround.
Robust economy: Through the entire gamut of churn and setbacks in 2016, only one city’s real estate market managed to hold its own and even achieve some modest growth. West Pune, with its dominant market PCMC (Pimpri-Chinchwad Municipal Corporation), has always been a unique as it rides on an unbeatable trinity of residential demand drivers – manufacturing, Information Technology and the services sector. This equation has perennially acted like a healthily diversified investment portfolio, with the inherent strength of one or two of these sectors compensating for the occasional de-growth in the others. As always, this factor came to the rescue of the PCMC residential market.
Employment still drives housing demand: While the manufacturing sector in PCMC has always been robust thanks to the MIDC belt, continued growth in IT and the various services streams additionally ensured that the employment graph remained strong. With job creation continuing to drive the demand for homes, Pimpri-Chinchwad Municipal Corporation crossed the finish line of 2016 ahead of the other major cities – with room to spare. Though the demand for prime and luxury housing has remained somewhat subdued, budget and mid-income housing saved the day. If anything, 2016 amply illustrated that the middle class in Pune and PCMC has become extremely choosy about its home purchases.
Unsold inventory: Many of Pune’s peripheral areas – the hot investment favourites of 2014-15 – saw a depressing build-up of unsold supply even in completed projects. The lack of support infrastructure and known deficiencies such as inadequate or non-existent water supply put paid to many a developer’s hopes of selling his stock solely on the basis of enticingly low rates and freebies.
Of course, every large city in the country has its share of unsold inventory today, either because of muted market sentiment, the fact that a lot of supply is still in the early stages of construction, supply in the wrong locations, or unrealistic pricing of certain projects by developers. In the case of West Pune, most of the non-selling oversupply has been in locations lacking infrastructure. In PCMC, the supply overhang is largely from smaller developers without a good track record and credibility on the market.
Evolving buyer preferences: Diwali, the traditional period for increased home purchases in Pune, saw very few takers for inferior projects in inferior locations. Even the prospect of acquiring larger homes than their current ones did not draw mid-income buyers to lagging locations. On the other hand, there was a distinct uptick for smaller but ‘high-performance’ homes in properly connected areas. The accent was on a high degree of facilitation within such projects.
Price corrections: With 2016 bringing a slow but steady erosion of property pricing in most of its markets, some of the previously unaffordable locations in West Pune / PCMC have once again become attainable to homebuyers. If Budget 2017-18 brings the hoped-for benefits for first-time property buyers and the RBI rolls out lower interest rates, there is every reason to expect a major revival in home buying sentiment – and it is the superior locations which will see the highest demand.
Outlook for 2017
The trend of the real estate market in Pune and PCMC performing against the larger odds will definitely continue. Not only do the twin cities have all the right economic and demand drivers firmly in place, but their inclusion in the 100 Smart Cities program will only increase the interest from multinational companies to set up and expand operations here. This will, in turn, increase inward migration and fuel greater demand from investors, even as local end-user demand continues unabated.
While the bulk of demand today comes from end-users, investors are still very much a force on Pune’s property market. The city offers several budget bandwidths and property typologies into which one can invest. Well-timed and properly researched real estate purchases can reap very satisfactory returns.
However, it should be borne in mind that not every kind of investment pays off equally in Pune – one needs to know precisely how each sub-market works, what it responds to and where the demand is headed. A poorly-judged property investment can be a disappointing proposition. Particularly, investors need to be wary of the cheap, potentially illegal ‘gray market’ residential constructions happening on the outskirts.