Pune’s residential real estate market continues to be in a state of stress: Rohit Gera

By Accommodation Times Bureau

Gera Development on Wednesday presented Gera Pune Residential Realty Report for July 2018, which revealed that the steep drop in the number of new apartments being launched has led to a reduction in the total inventory under development as well as a reduction in the absolute number of apartments available for sale.

From a peak inventory available for sale at 107,402 apartments in June ‘16 the inventory available for sale currently stands at 79,546 apartments.  This puts unsold inventory at approximately Q1 2015 levels.  The current inventory available for sale at 26.29% (79,564 apartments) is just below the Dec ‘13 unsold inventory which stood at 26.34% (55,377 apartments). On assessing the new launches of inventory by zone, Zone 1 has seen a reduction of 40% in the total apartments being launched for a period of ’17 – ‘18 this comes on the back of a 43% reduction for the same period between ’15 – ’16 and ’16 – ’17.

This steep 2-year drop is from 18,563 apartments launched in Zone 1 between July ’15 – June ’16 to 6,351 apartments in July ’17 – June ’18

The result of the slowdown in the realty sector is clearly visible in the number of new apartments being launched. On an annual basis, the drop from the year July ’14-June ’15 to the year July ’17 – June ’18 new apartment launches have dropped by nearly 50% from 110,824 apartments to 56,410 apartments. The alarming factor though is, on assessing this on a year on year basis, there is a drop of 7.93% (8,788 apartments) between ’14-’15 to ’15 – ‘16, then a drop of 19.71% (20,114 apartments) between ’15-’16 and ’16 – ‘17, and a huge drop of 31.14% (25,512 apartments) between ’16 – ’17 and ’17 – ’18.  Looking at the data on a 6 monthly basis shows a slight increase in the apartments launched in the period of Jan ’18 to June ’18 at 31,618 from 24,792 apartments between July ’17 to December ’17; this may be a sign of green shoots, however, doing a period for period comparison also shows this as the lowest number of apartments brought to market for the Jan to June period over the past 4 years.

Rohit Gera, Managing Director, Gera Developments said, “Pune’s residential real estate market continues to be in a state of stress. Developers have cut back substantially on project launches. With the implementation of RERA, capital has been forced to flow towards project execution, which has contributed to the slow-down in launches of projects. Sales to have continued to see a drop on a year on year basis.  The impact of slower sales is also visible on the rates – the slow reduction in average rates continues. The reduction of project launches, however, has led to some good news in terms of percentage of inventory available for sale, At 26.29% of the total inventory available, this percentage of unsold inventory is near a 4.5 year low. This could turn into the great news as and when the sentiment turns.”

Gera further added that “Once demand sees an increase and developers see returns return to the industry, we can expect an increase in the new project launches, however, with RERA, access to capital is now reduced and if the government wishes for developers to be partners in the housing for all mission, it is imperative that the current policy of banks not funding developers for acquisition of land be revised.”

The average residential property prices continued to decrease on an overall basis for the fifth consecutive half-year tracking period.  From a peak of Rs 5096 per sf. in Dec ‘15 to Rs 4685 per sf. in Jun ’18, the drop in the past 6 months has been a further 1.17%. For those projects that were ongoing in Dec ’17 and also in Jun ‘18, the average price in Dec ‘17 for these projects was Rs. 4763 per sf and the same projects in June ‘18 were priced at Rs. 4754 per sf – a negligible decrease in prices of ongoing projects.  The citywide average, therefore, came down on account of lower-priced new inventory being brought into the market. A further analysis of the average price of new projects launched & new phases launched of ongoing projects shows that the average rate at which new projects were launched in H1 2018 was Rs 3993 per sf.

New phases of existing projects were launched at Rs 4857 per sf in H1 2018 – above the Pune average.  There is a gap of almost 14.77% between average Pune price of Rs 4685 per sf & New Project price of Rs 3993 per sf. This indicates that while the overall average prices are declining – the decline being contributed by lower-priced new inventory being brought into the market and not on account of either existing projects or of new phases of existing projects.

Home sizes have been decreasing consistently over time and are now on an average at 747 sq. ft. Though the overall offtake has fallen, the share of the <600 sq. ft. the segment has been consistently increasing over the last 3 years from 22% to 27%. The <600 sq. ft and the 600-800 sq. ft. segments are primarily targeted by the Pradhan Mantri Awas Yojana. Over time, the share of offtake in the <800 sq. ft. the basket has remained consistent at 49% – 50%. Virtually all size segments above 1000 sq. ft. have seen a sizable drop in the sales numbers.



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