Pune Real Estate – Looking Back On 2014 And Into 2015

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd

Pune’s real estate market held its own in 2014 and its residential sector in fact out-performed most other markets in India. Appreciation in both mid-range and high-end properties was in excess of 30%, which was much higher than Bangalore, Delhi and Mumbai. However, it was not all smooth sailing.

For instance, there was an increase of unauthorized construction on the city’s peripheries, which the city authorities have to begin clamping down on earnestly. However, the fact that the authorities are taking such action is a good thing for the market in general and has added to Pune’s credibility quotient.

We saw rapid development of the city’s suburban and even peri-urban markets. More national-level players launched projects in these areas, which were previously the stronghold of local builders. Another interesting trend in 2014 was that some established areas like Koregaon Park and Sahakar Nagar, which had next to no new options for luxury home buyers, saw new augmentation of supply once more.

Sahakar Nagar, Pune
Sahakar Nagar, Pune

There will be a bit of a shake-up on the Pune real estate market in 2015 as it aligns itself to various new regulations, but this is a necessary process which will be seen in most cities of Maharashtra. The benefits given to both developers and buyers in the last Union Budget will kick in during the upcoming fiscal, and this will add to the already positive sentiment.

We will see increased purchasing activity in areas like Undri, Wagholi and Ambegaon, where affordability is driving demand. Most of the city’s rapidly developing areas will see healthy appreciation in residential values.

Real Estate Development: How FAR Can You Go?

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd

Among the various regulations adopted in real estate development, Floor Area Ratio (FAR) is one of the most critical ones because it decides the intensity of development which is permitted in a certain area.

Recently, the fact that the urban development ministry raised the FAR for residential areas in Delhi to 200% made headlines news because this will lead to a significant increase in built-up areas in many parts of the city, thereby infusing critically needed residential supply.

FAR regulations play a big role in any city’s real estate development profile and it is therefore important to understand the concept. FAR parameters vary from state to state and are governed by the respective city development authorities.

In other words, increase or limitation of FAR is not city-specific but area-specific. Every city has its own areas where higher FAR is permitted, with the intention of encouraging or accommodating growth of a certain market segment. Such ‘special’ FAR will not be applicable in other areas of the city.

Who Makes The FAR Rules?

The Ministry of Urban Affairs, which is the apex body that formulates and administers rules, regulations and laws related to housing and urban development in India, has provided general guidelines via the Model Urban & Regional Planning and Development Laws.

However, the implementation of these guidelines is entirely city specific and therefore in the hands of the respective city development authorities. Essentially, it is the city authorities that are empowered to plan the development of their respective cities.

Whenever a new area opens up for development, a city’s development authority will lay down a master plan that stipulates the land use zone, regulations that control development and permissible FAR for various uses.

How Is FAR Calibrated?

FAR is calibrated according to the nature of a project in terms of the intended usage. Generally speaking, on a plot of 100 square yards with a permissible FAR ratio of 2 allows a total built-up area of 200 square yards – the plot area multiplied by the FAR is the amount of construction that is permissible for that plot.

FAR for various zones and type of usage is notified by the local Development Control regulations. FAR in restricted zones like, say, Lutyens Delhi, may be 1 or even lower, while it would be higher in suburbs.

FAR restrictions are necessary in heritage zones which have protected monuments or other such features which could be destroyed or otherwise impacted by increased FAR in these areas. The issue of whether our cities should grow horizontally or vertically is basically one of limited available supply, and whether horizontal growth is a real solution in context with growing populations and increasing land prices.

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Pros And Cons Of Increasing FAR

There are advantages and disadvantages to increasing FAR. Lower FAR means higher horizontal growth, which is positive in terms of environmental sustainability but negative in terms of available supply.

Higher FAR implies lower horizontal spread and therefore lower consumption of available real estate, which means that it limits the escalation of property prices to that extent. It also implies a more workable set of infrastructure parameters than horizontal spread calls for.

Providing infrastructure to accommodate horizontal growth (i.e. lower FAR) implies more infrastructure over larger geographic areas, whereas higher FAR calls for more intense and specific infrastructure.

Increased FAR basically allows developers to save on land costs, and gives them a wider arena to operate on. This means that the units in the projects they build will be cheaper and also more plentiful in profitable areas, which is beneficial for property investors and their eventual buyers alike.

However, increasing FAR in some of a city’s areas for this reason alone is not a good thing, as it will result in an infrastructure deadlock and eventual fall in prices. On other words, assigning additional FAR is not something that should be done arbitrarily or without fully understanding the 360-degree real estate dynamics of a certain location.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Limited, is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury homes towers and premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic in Undri and Astonia Royale in Ambegaon.

Beware Of Fly-By-Night Real Estate Developers

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

The daily papers are replete with complaints by buyers who had been led astray or otherwise victimized by fly-by-night developers who specialize in launching small one-off projects and then wash their hands off the project. In a market environment where the exists a high degree of customer awareness with regards to most products, how can this continue to happen?

Property buyers are primarily attracted to projects by fly-by-night developers because of the low rates being quoted. What they do not realize is that these savings often come with huge potential losses in the future.

Many small-time builders have no core expertise in real estate development whatsoever – often, they are moneylenders, local politicos, uneducated farmers or even property brokers seeking to make a quick buck off unsuspecting buyers. Such developers are not interested in becoming established market players, and therefore have no stake in earning a reputation for transparency and wholesome business practices.

real estate sale

Such developers make their profits by using sub-standard construction materials, acquiring and building on plots with flawed or incomplete titles, circumventing or ignoring applicable development laws and neglecting to obtain all the necessary building permissions. They also accept ‘black money’ as part of their transactions, contributing to the opaqueness of the market and short-changing the government on stamp duty and registration revenues.

Likewise, scores of home buyers continue to be misguided by small-time property brokers who operate in tiny segments of the larger market and have no scruples about selling them inferior products on the primary or resale market. Untold numbers of buyers who avail of the services of such brokers find themselves holding properties whose defects come to light only after the transaction is over.

It is surprising that in an age where Indian consumers are highly attuned to the value that established brands bring to the table in the retail sector, a large number of Indians still patronize unscrupulous bit-players when it comes to buying a home.

We can only hope for a wholesome market environment where transparency directly benefits consumers if consumers themselves refuse to patronize operatives whose businesses thrive on concealment and false information rather than ethics and transparency.