Pune real estate sees prices drop for the first time
Knight Frank’s India yearly report states 41 per cent drop in new launches in the city between July and December 2017.pune Updated: Jan 11, 2018 16:07 IST
Pune The city known to offer the best of residential units, thanks to IT/ITeS, has seen 41 per cent drop in new launches amidst price drop of seven per cent between six months starting July till December, 2017, according to the property consultant firm Knight Frank’s yearly report-India Real Estate.
Post demonetisation and implementation of Real Estate Regulatory Authority (RERA), the Pune market has failed to push the sales in residential as well as in office segments, though co-working service providers are emerging well in the city in the commercial sector, states the Knight Frank report released on Wednesday.
According to Paramvir Singh Paul, Knight Frank Pune branch director, Maharashtra was the only state that notified RERA rules in a timely manner and subsequently implemented it across the state. However, even after the implementation of RERA, there has been no meaningful positive impact on sales on account of renewed confidence in the case of Pune in H2 2017.
“Ready to move in category seems to do better when it comes with a brand assurance and a developer with a good record, and the second half of 2017 has shown that the real estate market in Pune is in fact a consumer’s market and the best time to invest in real estate is now,” Paul said, adding that what an investor should be really looking at is that execution of the project, strong track record of developer, and depending upon the need, it is advisable to buy or invest in a property.
The report highlighted four factors. Pune has seen not many new launches and it is down by 77 per cent from peak of 2012, while the sales in first half of 2017 rose by 5 per cent but the second half saw a decline of 2 per cent. It is also for the first time that prices have dropped by 7 per cent with an effective price difference added with discounts which add another 12 to 13 per cent. The developers also have unsold inventory down by 43 per cent which is due to the restricted launches that have eased inventory pressure, but highlighted the market stress.
Meanwhile, the real estate players welcomed the revival of the real estate market in Pune. Shailesh Puranik, MD, Puranik Builders felt that the report indicated some positive things for the future of real estate in Pune. “There is a 27 per cent rise in sales and we are seeing a consistent and steady progress in our sales. The market is also performing well and it is an indicator of a revival,” Puranik said.
Paul said, “With RERA implementation, quality developers and confidence to buy will come gradually. There cannot be a time frame, but attractive pricing is happening first. Lot of demand from investors over the year is out of the market now and only genuine buyers are driving the market. Pricing is the first reason, RERA has given the buyers that confidence and this trend has been seen in the last six months.”
While in office and commercial sector, new completions are at a decadent low at 71 per cent for developers are diverting resources towards completing residential projects. The vacancy levels have hit five year low at 6 per cent. Though co–working service providers are seen as an emerging trend, the report stated.
Ranjit Naiknavare, secretary, CREDAI and director, Naiknavare Constructions, said, “Our data suggests that there was a drop of 26 per cent in launches. That is to be expected as RERA and GST needed to be studied and accounted for. The average sales rates are 3,706/sqft in Metropolitan Region Development Authority (PMRDA), 4,763/ sqft in Pimpri Chinchwad Municipal Corporation (PCMC) and 7,075/sqft in Pune Municipal Corporation areas. Registration of 2,575 residential projects under RERA out of a total of 3,402. Developer reputation, location of project, size of home and finally price determines the purchase decision and price is not the only consideration.”
According to Naiknavare, the total inventory overhang is only about 13.9 months for around 1 lakh supply. There is no data available to suggest that prices have dropped to this extent of 12-13 per cent as suggested in the report taking into discounting and quoted prices but increased holding and financing costs in addition to increased wages and regulatory costs suggest that this is a bottom and once the unsold stock is down to manageable proportions the prices in fact might increase post this quarter.