Pune’s Global Aspirations
Pune is not only an emerging realty market but is also a stable and end-user driven market. There are various reasons behind the stability of the Pune market and with new destinations opening up; the city has a lot for the real estate players. Rahul Trivedi examines the opportunities and challenges of Pune realty market.
Pune has been one of the most stable markets for the real estate players. This was even supported by the numbers as it outperformed Mumbai in terms of overall sales by about 20-25 percent. The key reason is the increasing workforce of professionals in the various segments of the industry.
Known for its manufacturing and automobile industries, as well as well as for research institutes of information technology (IT), education, management and training, Pune has attracted students as well as professionals from India and across the globe. The city is also considered to be the pensioners’ paradise and has as many as 52 senior citizens’ clubs. Being a pensioners’ paradise, the developers have another market to tap on.
Pune inclusion in the smart city scheme has opened up new avenues for the developers. With the advantage of proximity to Mumbai, development of the Chakan Talegon belt, good connectivity to the other cities and quality living conditions, Pune has become an attractive investment destination.
Because of the influx of IT, residential demand has been very high and the trend seems to continue as these are established destinations now. With the development of the Nagar road, this area is set to become the most sought after residential destination. In fact, most of the migratory population/cosmopolitan crowd is settled in the eastern belt.
Pune has been developing in a circular fashion. The Mula-Mutha River cuts the city into two halves, the Western quadrant consisting of Aundh, Baner, Pashan, Balewadi, and Bhavdhan and the eastern belt being Kalyani Nagar, Viman Nagar, Nagar road, Kharadi. Aundh, Baner, Wakad, including Balewadi , Bhavdhan, Hinjawadi that have become the prominent IT corridors.
The Emergent Areas
With the advent of gaming and biotechnology in addition to information technology, there is demand for housing in all sectors with most working people looking for the walk-to-work concept, few areas like Chinchwad, Wakad, Baner, Balewadi, Hinjawadi and Sus Pashan in the western corridor and Hadapsar, Kharadi, the lifestyle destination NIBM, Kondhwa, Sinhagad Road and Ambegaon have become the prime areas where maximum development is to happen.
As per Ashutosh Limaye, National Head – Research & REIS, JLL India, Pune is also set to see more transit-oriented development going forward. “More high-rise buildings along the proposed metro and other mass rapid transport routes have been allowed to align with global urbanization trends. And a maximum FSI (floor space index) of 4 is being given in such cases to encourage densification. The eastern corridor has taken the lead in such developments, but the western corridor is catching up. Some of the prominent areas where taller towers either already exist or are coming up include Kharadi, Hadapsar, Kalyani Nagar in east Pune and Hinjewadi as well as areas in and close to Wakad and Pimple Nilakh in west Pune.”
Some other areas to look out for are Ravet, Kothrud, NIBM Annexe, Wanowrie, Koregaon Park, MG Road, Wagholi, Kalyani Nagar, Viman Nagar, Dhanori, Manjri, Alandi, Aundh, Bavdhan, Punawale, Pimple Saudagar, Deccan Gymkhana, Fergusson College Road, JM Road, Law College Road and Bhandarkar Road. According to Kishor Pate, CMD – Amit Enterprises Housing Ltd, Ambegaon will be one of Pune’s most exciting property boom regions for several years to come. “Ambegaon is close to the new MIDC in Shirval, which is a massive employment hub which has given rise to ever-increasing demand for both budget and premium homes here. The growth of Ambegaon has been partially because of the spill-over demand from Sinhagadh Road, which has developed very rapidly and seen unattractive price growth as a consequence. But one of the leading factors for Ambegaon’s quick rise to fame has been the fact that it gives property buyers a diversified choice of homes, ranging from premium bungalows and villas to budget flats. It is also a favorite with investors from cities like Sangli, Satara, Kolhapur and Shirval.”
The Smart Development
Though Pune has always been a positive market for the developers, the smart city announcement has given a lot of push to the construction and real estate sector. As Vishal Jumani, Director, Supreme Universal pointed out, “Pune is evolving as a cosmopolitan society with people from all over the country migrating here for better job and education opportunities. Now that the city has been shortlisted and has started work under the smart city development scheme there will be multiple benefits for the city. The authorities plan to create 5,00,000 high-end jobs within the city. The creation of such quantum of jobs is going to ensure sustained demand for Commercial, Residential and Retail real estate.”
The Smart City goal saw introduction of 14 different projects under the Pune Smart City Development Corporation Limited. Over 300 reputed foreign companies showed their interest in investing in Smart City projects (traffic, water and garbage management) to assist the PMC.
Centre led AMRUT scheme ensured five new projects worth Rs 3200 crore for Pimpri Chinchwad. The Pimpri Chinchwad New Township Development Authority has planned 4,000 low-cost tenements at sector 12 and the Pune Metro rail project covering a distance of over 31 km over two corridors has also been initiated.
Despite all the strengths of the city there are areas where significant improvement is needed majority in the basic infrastructure. “The Pune Municipal Corporation (PMC) has not been able to keep up to speed on its own infrastructure scenario. The heedless way with which real estate development has been taking place in Pune has not only resulted in a veritable concrete jungle but also made problems like traffic congestion, air and noise pollution and also water depletion much worse over the past several years,” commented Anil Pharande, Chairman – Pharande Spaces.
- Pune enjoys a comfortable climate ranging from 12 to 38 degree Celsius and has been ranked the second best Indian city after Hyderabad in the Mercer’s Quality of Living rankings leaving behind the cities of like of Bengaluru, Mumbai, Delhi, Chennai and Kolkata.
- Pune is the creator of strongest human capital and is economic growth engine among Indian cities. Considered the ‘Oxford of the East’, the city has more than 800 colleges producing more than 30 percent of the graduate workforce in various industries, IT sector being the major employer.
- The city is the second biggest IT hub in the country and also has strong manufacturing base across auto and engineering which makes Pune one of the top five destinations for FDI.
- The first and the foremost area of improvement is the mobility. The city has seen a tremendous increase in the number of private vehicles and the lack of public transport has led to massive congestions across the city.
- Around 14 percent of the citizens get water less than the stipulated amount on daily basis. The unequal water distribution is driven by the lack of infrastructure system like reservoirs, pipelines etc..
- Around 28 percent of city’s households are still dwelling in the slum which is much higher than the national average of 17 percent.
- The unplanned growth of Pune has resulted into the lack of open spaces too. The urbanization has taken a toll on the livability and sustainability parameters as the air quality stands 91 in Pune as compared to the ideal state of 60. Also up to 350mld untreated sewage is discharged into the Mula-Mutha River.
Under the smart city proposal, the target of making Pune slum free by 2025 has been set. To achieve this target, there is need of around 20,000 houses every year for the next 10 years. With Government’s impetus on the affordable housing there is a huge opportunity for the developers to tap.
Going by the stability factor of the Pune Realty Market, the launches and sales are expected to pick up in the year 2017. The launches which saw a decline of around 36 percent in 2016 over 2015 will see an upward trend as the developers will launch more affordable projects. The trend of targeting the budget and mid-end segment were also seen in 2016.
Pune has maintained year-on-year appreciation in capital values. The bulk of the demand for housing stems from the steady migration of professionals and students from other parts of the country, presence of IT/ITeS, bio-technology & manufacturing hubs and educational institutions. Moreover, the property values in the city are still realistic as compared to the other metros.
Pune Micro markets Classification:
Central – Koregaon Park/ Kalyani Nagar /Boat Club/ Sopan Baug;
Old Central – Camp/Deccan;
East – Viman Nagar/Kharadi/ Wagholi;
South – NIBM/Undri/Kondhwa;
South East – Magarpatta/ Hadapsar/ Keshav Nagar;
West – Baner/ Balewadi/ Hinjewadi/ Wakad/ Pashan/ Aundh;
South West – Kothrud/Bavdhan/Warje,
North – Pimpri/Chinchwad/Chakan/Talegaon
In the current scenario, developers are trying to complete their already launched projects instead of launching new ones. Thus, soon a lot of ready-to-move-in inventory is expected to enter the city. Not only the residential but the commercial market has also seen a healthy growth.
The major reason behind this is the significant increase in the leasing activity. As per the latest market reports, leasing activity significantly increased in the peripheral business districts of Hinjewadi, Hadapsar, Yerwada, Kalyani Nagar, Phursungi and Kharadi. US based IT/ITeS companies took space in WTC Phase III in Kharadi, while Infosys leased more than 600,000 sq. ft. space in Hinjewadi. Other major deals that made headlines this year were UBS taking up space at Commerzon in Yerwada, Allstate in SP Infocity, Citi Bank in EON Kharadi amongst others.
CBRE Report on Pune Office Market states that the leasing activity also increased in the Central Business District (CBD) of MG Road, Koregaon Park, Bund Garden, Kalyani Nagar, Dhole Patil, FC Road and JM Road. Various small-sized transactions were concluded by BFSI (mainly financial services) companies and IT / ITeS firms for their front-office operations. The micro-markets also witnessed the completion of a small-sized investment grade development. On account of the new supply addition, rental values across non-IT developments remained largely stable, while increasing by 2-4% q-o-q across IT developments.
The Off CBD micro-market of Viman Nagar, Magarpatta, Aundh, Baner and Shanker Seth Road witnessed an increased demand for office space; accounting for more than 70% of the overall space take-up in the city. Various medium to large-sized transactions (50,000 – 150,000 sq. ft.) by BFSI companies were concluded, majorly across prominent IT buildings in the city.
The sustained demand and limited availability has contributed to 1 – 4% q-o-q increase in the rental values across IT and non-IT buildings. Rents remained largely stable in the SEZ segment. In terms of new supply, two investment grade non-IT developments were completed in Hadapsar and Baner.
Leasing activity declined in the Peripheral Business District (PBD) of Hinjewadi, Kharadi, Hadapsar and Talawade. Only one large-sized and a few small-sized transactions were closed, mainly by IT / ITeS companies. On the supply front, an SEZ development was added as a part of an existing campus in Hinjewadi. Rental values remained largely stable in the SEZ segment, while they increased by 1-3% q-o-q across IT and non-IT developments.
When a city has been listed in the smart cities, the infra challenges need to be addressed immediately. Rahul Nahar, Founder, XRBIA Developers Ltd stated, “Pune has an under developed transport network and is one of the few cities that has a weekly cut off on the electrical systems. The focus on basic infrastructure is mandatory before even thinking of turning Pune into a Smart city.” Concurring to the statement Jumani expressed that a time-bound implementation of all the projects identified to be undertaken in the Smart City Plan document itself will ensure most of the city’s troubles are taken care of.
Pharande explained, “Though negligence and greed are definitely operative factors in the illogical way the Pune Municipal Corporation has been developing, it also has certain limitations. In the first place, integrated township projects require substantial acreage, and large plots have essentially been completely used up in the central regions of the PMC. As consequence, the focus has now shifted to the Pimpri-Chinchwad Municipal Corporation, where affordable property rates and a scientific approach to real estate development are bringing in township developments.”
With the state government giving its nod to 100 m tall buildings in Pune in November 2007, a slow and steady trend rising in the city is that of high-rise construction. “Aspirational Punekars are following in the footsteps of Mumbaikars, who have for long considered skyscrapers as a testament to their success and status in society, apart from the other inherent benefits. Developers are increasingly flaunting higher storeys in their marketing collaterals to target the aspirational homebuyer and stand apart from the competition,” briefed Limaye.
Indeed, it would be interesting to see, the nature of Pune market after so much has been said and done on the infrastructural front. Another interesting factor on which everybody will keep a close watch will be the price trend. Being the end-user driven market, how would Pune leverage its IT base to emerge as one of the leading realty market of India.
Despite being weak on few infrastructure initiatives like equal water distribution and public transport, Pune is one of the best performing market in India. Vikram Goel, CEO, HDFC Realty.
Pune market has been stable over last one year given the various legislative and market dynamics with positive investor demand in commercial real estate. Affordable housing announcement has also positively impacted residential market in Pune which has seen a shift in the buying demand to southern and western suburbs where value for money housing developments are aplenty.
Viman Nagar, Vishranthwadi, Bhugaon and northern suburbs are among the emerging locations that have seen significant development. Locations such as Hinjewadi, Wakad, Tathawade, Ravet, Undri, and Wagholi have stabilized and are witnessing fewer launches. Core city areas continue to witness luxury and premium residential launches though the supply is likely to be deferred as many are redevelopment projects.
Given that commercial real estate has seen an uptake in Pune, investors have driven demand for pre-leased commercial properties that provide more than average yields. Also, given, the city’s large presence of expats visiting or working in IT, automobile and logistics sectors, the Smart city infrastructure will give it a global appeal.
The landscape of Pune has transformed over the years at such a huge trajectory that the once the quaint little town in Maharashtra, it has become one of the most sought after destinations today. Skyscrapers, improved infrastructure and emergence of IT parks and commercial establishments have changed the face of Pune. However, challenges pertaining to internal city infrastructure and transportation limit Pune from achieving its potential as an integrated city.
Unplanned urbanization in new emerging areas due to lack of clarity on the localized development plans and issues pertaining to inclusion of more villages into the municipal limits with no zoning regulations, has created a hindrance to infrastructure development. Unchecked urban sprawl in planned areas and encroachments with frequent political interference has led to situations wherein planned investments and developments are impacted.
It is important that suburban developments in emerging pockets are taken up on priority. The challenge also lies in creating a more environmentally sustaining development as water availability is fast emerging as the deciding factor in urbanization.