Pune residential market sees a price decline for the first time in a decade- Knight Frank India

Pune, January 10, 2018: Knight Frank India today launched the eighth edition of its flagship half yearly report - India Real Estate. It presents a comprehensive analysis of the residential and office market performance of Pune for the period July – December 2017 (H2 2017).

Residential Takeaways:

· Residential launches shrunk by 58% in H2 2017 as developers’ focus shifted towards completing existing projects. New projects down by a staggering 77% from its peak in 2012

· Decade records debut fall of 7% in average weightage price. Developers’ make the deal sweeter with collective discounts up to 12-13%

· Sales volumes in H2 2017 are down by 2% YoY but upcoming IT markets in western Pune have performed better in H2 2017 recording a 27% rise in sales

· While unsold inventory levels crashed by 43% in H2 2017 YoY;,QTS drops to less than a year

Office Takeaways:

· New office supply dwindled by almost 71% in H2 2017 courtesy developers’ focus towards incomplete residential projects

· The Pune market bounced back in terms of office leasing registered a 51% growth in H2 2017 YoY

· While vacancy levels plunged from 8.2% to 5.8%, weighted average rentals across Pune increased 5% YoY to Rs. 63/sq. ft/month in 2017

· The share of the Other Services sectors more than doubled even as the demand from the traditional market leader - IT sector tapered from 44% in H2 2016 to 36% in H2 2017

Speaking about the findings, Paramvir Singh Paul, Branch Director – Pune said, “Maharashtra was the only state that notified the RERA rules in a timely manner and subsequently implement edit state-wide, despite this there has been no meaningful positive impact on sales on account of renewed confidence in the case of Pune in H2 2017.Sales were marginally lower at 2% year-on-year(YoY) in H2 2017 which could be attributed to the consumer sentiment being dented by job losses in the IT industry.The upcoming IT markets of western Pune have performed better in H2 2017 recording a 27% rise in sales. Launches on the other hand, declined by 58% in H2 2017 compared to H2 2016 as developers focussed their efforts on completing on-going projects rather than launching new ones. For the first time in this decade(2011–2020), there was a reduction in quoted prices in Pune as the weighted average prices reduced by 7% YoY. In addition to the reduction in base prices,developers offered discounts in the form of freebies thereby taking the effective discount to 12–13%. The overall unsold inventory levels during H2 2017 fell 43% YoY to 28,455 units down 60%from the peaks of H1 2014 while the QTS (Quarters To Sell) drops to less than a year.

Office space completions, on the other hand, took a back seat in the backdrop of RERA implementation and developers’reorientation towards completion of residential projects.Declining by almost 71% in H2 2017,the new project completions were a meagre 0.35 mnsqft in this period.On the demand side,transaction volumes registered a 51%growth in H2 2017 compared to H22016 while the annual growth for 2017 was counted at 18%.The IT industry had the largest share of transactions in H2 2017, butthe slowdown in the IT industry dueto global headwinds was visible in the drastic fall in share compared to theprevious year. The share of IT/ITeS reduced from 44% in H2 2016 to 36%in H2 2017.This led to an increase in the share of Manufacturing and Other Services including co-working from 14%and 10% in H2 2016 to 20% and 21%,respectively, in H2 2017.There has been a shortage of good quality large office space supply in Pune. The occupiers are increasingly finding it difficult to find a spaces uiting their requirements and some transactions are being held up for the same reason. With no major supply expected to come up in 2018, the effects of this shortage would reflect significantly on the vacancy rates and the rental growth in Pune in 2018.”