Pune Real Estate On A High Trajectory

(TOI, Oct 13, 2010)
PUNE: Prices of the city’s residential property are witnessing a rise, if market observations of leading realty research firms are an indication. Rentals of commercial space are also witnessing an upward movement, though the market cannot yet be called a heated one, the firms have said.
Rates in different parts of the city have recorded anything between 15 to 25 per cent rise in the past one year or so, rising customer interest being one of the factors, the observers added.
“As far residential properties are concerned, the sector is moving again for the last six months or so. Previously, we had thought the returning demand will fizzle out by April, but that has not been the case. The impression one gets is that Pune’s home buyers are once again convinced of the long-term potential of their investments,” Mohammed Aslam, Pune head for real estate advisory Jones Lang LaSalle India told TOI.
“I won’t say that the market is back with all guns blazing, but matters have improved considerably. Residential sales and retail lease figures for the month of July 2010 look astonishingly different than from this time last year, Aslam of JLL said.
For mid-income homes, the hottest-selling locations are now in western Pune, he observes. Buyers have the widest choice there because of the large number of projects popping up all over Hinjewadi, Wakad, Pimple Nilakh, Pimple Saudagar, Aundh and Balewadi. Secondly, this influx of projects is serving to keep prices affordable. In western Pune, average residential property rates start at around Rs. 3,200 per sq.ft. and hover around Rs 4,000 per sq.ft. The most popular price tags for homes in these areas are between Rs. 30 to 40 lakh.
Manish Aggarwal, executive director, investment services, Cushman & Wakefield India (C&W), said, “With India’s economic environment showing signs of stability and buoyant growth, coupled with improvement in affordability and access to finance, housing demand in the country is expected to witness a revival in the near future.”
According to the C&W report, Pune is expected to witness the highest demand in residential sector after National Capital Region (NCR) and Mumbai. Pune is estimated to witness a demand of 2,70,000 housing units by 2014, the report says. “The growth in demand for residential units in Pune can be attributed to rapidly growing city population (both migratory & local), coupled with improvement in economic environment with stimulate growth of both IT and manufacturing sectors in this city,” the report adds.
Real estate advisor Ravi Verma, a former official of the National Association of Realtors, said, “The residential market is moving briskly and both high-end and economy segments within the residential sector are doing well. There is however a warning here, that the prices are rising slowly but definitely.”
Offices segment, on the other hand, has yet to pick up speed, as there is a sizeable overhang of stock created or planned prior to the economic slowdown of 2008-09. Verma said the information technology sector which drove most of the deals in the early part of the decade is still slow in absorption of space and so are the retail and commercial spaces.
Aggarwal said, “The overall demand for commercial office space is subdued in comparison to the supply which is estimated to be approximately 400 million sq.ft during 2010 to 2014, implying caution and the need for quality supply at the right prices.” According to him, the demand for retail space across the country is estimated to be 55 million sq.ft; of which the top seven cities will witness approximately 53 per cent.
The total mall supply expected between the period under review is approximately 93 million sq.ft. NCR, followed by Pune, is likely to witness the highest demand-supply gap over the next five years, with supply overshooting demand.

Home And Personal Loans To Cost More

The Reserve Bank of India (RBI) on Thursday hiked policy interest rates, sending a message to banks that they need to do the same for their loans. The silver lining is that interest rates on fixed deposits will also rise from the current 7-8% levels.
The RBI increased the repo rate (the rate at which it lends money to banks) by 25 basis points to 6% and the reverse repo rate (the rate at which the RBI takes out excess cash in the banking system) by 50 basis points to 5% with immediate effect.
The central bank did this primarily to contain inflation and to ‘normalise’ policy rates, considering the speed at which India’s economy is growing. Interest rate is a monetary tool used by central banks to ensure that a fast-growing economy doesn’t get out of hand — primarily, that prices of goods, or inflation, don’t spiral out of control due to excessive demand, the hallmark of fast-growing economies.
This is done essentially by controlling the amount of money floating in the economy by raising or lowering interest rates. When an economy declines, the opposite happens — central banks lower interest rates so that people are persuaded to buy goods and thereby generate demand.
“The RBI believes inflation has plateaued (and the declining trajectory inline with its projection), but it highlights that it will remain at ‘unacceptably’ high levels for a few more months.
It hence believes that there is a need for continued policy response to contain inflation and anchor inflation expectations,” said Ashutosh Datar, economist with the brokerage IIFL.
“The broad indication of the RBI action on Thursday is that lending rates will rise. We will take a call in a few days on increasing our personal and home loan rates because the impact of this rate hike will have to be passed on to consumers,” said Kamlesh Rao, executive vice president (personal loans and home finance), Kotak Mahindra Bank.
The timing of the hike will vary from bank to bank, depending on the cost of their money.
“On the interest rate scenario there is definitely an upward bias. But the hike may not be immediate. It will depend upon the credit pickup. Initially, it may be a hike of 25 basis points,” said MD Mallya, chairman and managing director, Bank of Baroda.
It seems both the RBI and the government want fixed deposit rates to rise.
“If bank credit is not to become a constraint on growth, real interest rates need to move in the direction of encouraging bank deposits,” the RBI said on Thursday.
On Wednesday, the government raised the employees provident fund rate by 100 basis points to 9.5%.
Banks had already resorted to hiking their benchmark prime lending rate, or BPLR, in August, citing reasons that their costs were going up. In the near future, they may hike it further and may even hike the base rate, which came into existence from July 1 this year.
“The BPLR may be hiked further as most of the lendings happen through it, and there is also the likelihood that the base rate may be hiked in the next quarter since banks have the option to change the base rate every quarter for the first year,” said Deepak Tiwari, banking analyst at KR Choksey Shares & Securities.
“Borrowing rates will go up for both consumers and developers,” said Shobhit Agarwal, Joint Managing Director (Capital Markets), Jones Lang LaSalle India, a real estate consultancy. Conversely, this could mean demand for homes, and therefore their prices, may decline.
“The projects that are already priced high, the impact in terms of demand erosion will be higher. We don’t see much impact on low-cost housing, that is Rs25-50 lakh purchases,” said Agarwal.
But teaser home loan rate — where you pay a low interest rate in the first year and more later — won’t be discontinued as they are a hot favourite among borrowers.
“I expect teaser loans to continue as they are so popular with people. But I think banks may continue those schemes with a slight increase in rates, said Harsh Roongta, CEO of apnapaisa.com, a personal finance advisory. The State Bank of India (SBI) is offering teaser home loans till September 30 and the committee will take a decision on whether to extend it further or not on September 28, said a senior SBI official.

Realty Bubble To Escape Action

An extraordinary sharp rise in property prices and robust growth in banks’ housing loans portfolio is drawing attention of policymakers, economists and bankers said this week.
It is not clear whether the Reserve Bank of India, in its mid-quarter policy review on Thursday, will take more than cognisance of these developments that have impact on the effectiveness of its battle against inflation. Some economists believe RBI won’t impose curbs on bank credit to realty sector although housing inflation is fed by easy availability of banks loans.
Not that it has ignored this development.
Late August, the central bank’s annual report noted, “Although housing prices witnessed correction during the global financial crisis, there was a sharp rebound in the subsequent period.”
“Greater pace of rise in asset prices continued to remain a concern from the standpoint of macroeconomic management,” the report said.
Realty bubble
Rising property prices in past one year have raised fears an asset bubble may be forming in real estate sector.
Reliable data on housing prices is limited. According to Makaan.com, a website on real estate, property prices in Mumbai and Pune rose 10-14% in the year to July 31. In Delhi’s National Capital Region, prices were up 30%. An official indicator of housing prices is the consumer price index for urban non-manual employees (CPI-UNME). This puts housing inflation at 33% from a year ago in June.
The escalation in property prices “is somewhat out of sync from fundamental viewpoint”, said Abheek Barua, chief economist at HDFC Bank. In the past, RBI has increased risk-weights on banks’ loans to real estate to limit lending to the sector. RBI hiked risk-weight on advances to commercial real estate sector to 1% from 0.4% in October 9. Rating agency Crisil’s economist dismissed ideas the banking regulator would impose stricter sanctions on real estate loans in Thursday’s policy.
“Real estate prices have been on RBI’s radar for some time,” acknowledged Dharmakirti Joshi, chief economist of Crisil. But “I don’t think there will be any major changes (in real estate lending norms) on September 16,” he said, noting, “There are still downside risks to the economy.” For some, spike in home prices mirrors growth in economy, and therefore there is no need for RBI to up the ante on housing.
“I don’t think there is any bubble in property prices at this point of time,” said Madan Sabnavis, the chief economist of Credit Analysis & Research, also a credit rating agency.
“Overall, if one takes a sanguine view of the Indian economy, things are looking positive. So it is natural realty prices will also go up,” he said. “I don’t think RBI needs to act or will act immediately. But if this upswing (in property prices) persists, RBI may act accordingly,” he said.

Celestial City: Ravet’s Pride Is Right On Schedule

Celestial City, the unique 25-acre integrated township by Pharande Spaces and Rama Group, is now in the second phase of construction. As planned, this premium apartments complex at Ravet, PCMC is transforming the real estate topography of an area known as the Gateway to Pune.
celestial-city-ravet-roads1
Celestial City has been conceived as a completely self-sufficient residential microcosm that will offer its residents absolutely everything by way of a comfortable lifestyle.  That blueprint is now rapidly being transformed into reality as construction enters the next phase.
The location of Celestial City couldn’t be better – it was planned as both the ultimate residential destination and a sure-fire investment hotspot. Ravet is located at the confluence of the old NH4, the Dehu Road- Katraj bypass and the Mumbai-Pune Expressway.
celestial-city-phase-two
Its ready accessibility, as well as proximity to vital establishments, has earned it the distinction of being one of the most prominent growth corridors on the Pune real estate market.
Because of its unique location, invigoratingly green spaces and affordable residential property options, Celestial City is now attracting a huge demand from executives working in Hinjewadi, Pimpri-Chinchwad, the Talegaon MIDC and Chakan MIDC.
With Phase II of Celestial City now in active progress, the project is well on the way to completing the planned roster of 2000+ units at this avant-garde budget homes project.
celestial-city-sample-flat
Celestial City is backed by the experience and impeccable track record of two leading development concerns. Pharande Spaces, the residential property trendsetters in Pimpri-Chinchwad, already have several landmark projects to their credit – including the award winning Culture Crest.
To date, Pharande Spaces have completed residential projects in excess of 1.5 million square feet. Likewise, Rama Group’s professionalism and expertise have led to the completion of 23 projects that cumulatively account for 5 million square feet of construction.
The fact that Celestial City is fully underwritten by the country’s leading financial institutions ensured a smooth, seamless construction flow even during the worst of the recent recession. With Phase II on schedule, Ravet’s crowing glory has taken a decisive step towards final completion.
When two real estate giants join hands to create the City of the Future, the outcome can be nothing less than magical….

celestial-city-archA masterpiece in the making

celestial-city-sample-flat-livingroom
K. D. Nagarkar is a blogger and freelance journalist who specializes in real estate and environmental issues. He keenly follows the development of integrated township properties and other sustainable projects in and around Maharashtra.
You may reprint or quote this article with full credit to the author and a link back to PunePropertyBlog.com

Affordable Housing: The New Buzzword In India’s Real Estate Industry

The new buzzword in the country’s real estate industry today is ‘affordable housing’. Developers stung by a credit crunch, besides the drop in demand for commercial spaces and premium residences in recent times, have turned their focus to the middle-class segment.
Due to weak demand in commercial and retail segments, most developers have started looking at the affordable residential segment to maintain cash flow in order to meet their contractual obligations. Further, with buyers being extremely price conscious, the demand for affordable housing is on the rise.
A Relative Term
A simple definition for affordability can be — the consumers’ ability to purchase. However, this is a relative term. The idea of affordability may vary from individual to individual as well as from place to place. For example, what is considered affordable to a home seeker in Pune may not be affordable to someone else in Mumbai.
With the common man (read middle-class segment) constituting nearly 70 per cent of the demand for housing, we shall keep our understanding of ‘affordability’ limited to that which is deduced by the aam aadmi.
Affordable housing refers to residential units offered by developers at prices that are within the budget of low- and middle-income groups of a society. The housing units should also have all the basic amenities to cater to the daily needs of the household.
Monthly carrying costs of an affordable home should not exceed 30 per cent of the household gross income. Affordability is quantified by household income and price of the product.
Demand Growth
With the ever-increasing urban population, demand for affordable housing is witnessing a constant rise. According to recent a Planning Commission report, the shortage in urban housing as on March 2007 was estimated ar around 24.71 million.
The report went on to say that this shortage would to 26.5 million by 2012. Ninety nine per cent of this shortfall comes from the economically weaker sections (EWS) and low-income groups (LIG).
With real estate players witnessing a credit crisis, several of their big projects have come to a halt. Considering the huge demand in the affordable housing segment — which is relatively insulated — developers have now increased their focus on the fortune at the bottom of the pyramid.
An estimated 450 new projects have been launched, or are expected to be launched, in the affordable housing sector from big and small developers across the country.
Read the rest of the article here.

Residential Property Prices High In Pune And Mumbai

There is an emerging consensus that Indian home buyers are mostly end users, looking at new properties in upcoming locations. They are comfortable with leverage and primarily interested in mid-income housing.
End-user demand is higher in Mumbai, Hyderabad and Bangalore, while investor demand is higher in Ahmedabad and Pune. The perception of home prices being high is prevalent mostly in Mumbai and Pune.
Read the rest of the article in the Financial Chronicle, There is a buzz out here.