Real estate is one of the key drivers of Maharashtra’s economy. It creates jobs at a number of levels, from construction labour to architects, engineers and town planners.
At the same time, it also fulfills the fundamental need of providing housing as well as workplace spaces to the common man. Like every other state, Maharashtra has its key hotspots for economic activity and therefore real estate development.
These cities and towns each has their own individualistic demand patterns, and developers operating in them have to chart this demand pattern and cater to it accordingly.
At any given point in time, some Maharashtrian cities and locations within these cities definitely provide higher value to real estate investors than others.
This is because the rate of job creation, infrastructure deployment and housing demand are higher in those markets than in others. As job creation and infrastructure deployment spread gradually to other areas via the ‘fallout effect’, these locations pick up in terms of viability for real estate investment as well.
At AEHL, our primary focus is currently on Pune because of the excellent economic attributes of this city. However, we have also launched operations in Nasik because this city is fast becoming a very serious contender both in terms of economic activity and real estate demand.
In Maharashtra, Pune, Mumbai, Nasik and Nagpur are currently the most promising cities. However, with the new Chief Minister showing an unerring focus on developing the state as a whole, we see a very uniform pattern of growth emerging in the future.
Over the next few years, we will see the arrival of other growth nodes within Maharashtra. Residential real estate will continue to rule the roost, and budget housing as well as mid-income housing will be the most important categories driving real estate growth.
At the same time, commercial real estate projects that open up employment opportunities will always work in tandem with residential real estate to unfold the state’s fullest development and growth potential.
The formation of the Pune Metropolitan Region Development Authority (PMRDA) is a very positive step. This model, which has already worked very well in Mumbai’s MMRDA, has so far not been able to see implementation in Pune despite being tabled several times.
Chief Minister Devendra Fadnavis is rightfully determined to see it through and make sure that it can meet its intended objectives. His intervention is indeed very timely.
Boost To Infrastructure Projects
Among many other things, key infrastructure projects such as the Metro rail and the Bus Rapid Transit System (BRTS) must be fast-tracked so as to aid to overall development of the city, and the PMRDA will focus on achieving this.
PMRDA will act as a unified platform for planning and execution of these and other important projects, and will serve to resolve disagreements between various planning authorities. In short, the process of project implementation will be rendered faster and less cumbersome.
PMRDA will ensure that the related planning departments are adequately staffed and funded, and it will also play a major role in addressing the issue of illegal constructions in the emerging areas of Pune district.
Revitalizing Pune’s Regional Plan
One of its first and foremost functions will in fact be to update Pune’s Regional Plan and to make sure that this plan addresses the current problems being faced in Pune’s emerging areas. PMRDA will have jurisdiction of close to 3000 square kilometres, which will include PMC and PCMC and various gram panchayats.
The implementation of PMRDA will, in fact, mark the end of the Pimpri-Chinchwad New Township Development Authority (PCNTDA). To date, the PCNTDA has done an exemplary job in creating a highly organized development environment in Pradhikaran; however, the benefits of its efforts were limited to the area of its jurisdiction. The PMRDA aims to bring the same results over a much larger operational domain.
It is, however, a matter of concern that the Pune, Khadki and Dehu cantonment boards have been taken out of its ambit as per a recent declaration. I am not certain how the PMRDA will be able to operate to its best potential and work towards a well-rounded development plan for the city without including these key cantonment areas, as well.
The Ahmedabad Model
PMRDA intends to use land banking and transfer as a source of revenue generation, effectively creating its own projects and fully enabling land parcels with support infrastructure before selling these for commercial use.
Thanks to be infrastructure, the value of these land parcels rises significantly, to the tune of 25-30% This is an excellent model has already been very successfully used in Ahmedabad.
This is a near-perfect model for development in the Indian context, since it brings with it a high level of transparency and governance into every aspects of urban and rural planning.
It results in win-win situation for every stakeholder involved in the urban development process, including land owners, real estate developers, real estate end-users and, of course, the Government.
About The Author
Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. 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 and Colori in Undri and the Mediterrenean-style township Astonia Royale in Ambegaon.
Some of the leading banks have set the score by picking up on the RBI’s signals and reducing their lending rates by between 0.15-0.25 basis points. Several other banks have now followed suit.
I expect this to be only the first of more reductions to follow. There is invariably a lag between the directives given by the RBI with regards to lowering lending rates, and banks complying with these directives.
It is encouraging that these banks have taken the initiative, leaving other banks with little option but to follow suit. The housing loan segment is an extremely competitive one, and it is noteworthy that home loan disbursements in the Pune region had reduced significantly in recent times.
With this positive development, we expect the rate of loan purchases via home loans to begin picking up in Pune, which is a very cost-sensitive market.
We already know that Pune is no longer just a Pensioner’s Paradise (though it still is the #1 city of choice for retiring people in Maharashtra). At least three other factors now define Pune – the growth of the Information Technology, the massive spread of organized retail and the city’s changing demographics.
The last factor has had a significant impact on the demand for real estate in Pune, both in terms of sizes and types of homes. Until the late 1980s, residential real estate demand in Pune was driven largely by people who were working in a rather laid-back services industry.
The modus operandi for home purchase in those years predominantly revolved around saving up a sizeable financial corpus and purchasing whatever home was affordable in that budget, preferably with little or no leverage.
Pay scales were moderate to low, and a comparison with the far more favourable pay scales prevalent in Mumbai was inevitable. As a result, there was a more or less constant flight of talent and capital from Pune to Mumbai. At the same time, lack of international employment opportunities prevented Pune’s qualified youth from exploring their fortunes abroad.
As a result, the city’s residential real estate market catered to a very basic level of requirements. There was little incentive for developers to be adventurous in unit sizes, specifications and locations. Property rates – and therefore property investment potential – remained low as the city awaited new market triggers.
Then, in 1990, Pune began to emerge as a destination for Information Technology companies. At first, this was limited to BPOs who sought to capitalize on Pune’s considerable English-speaking manpower and its low property rates.
Nevertheless, the economic impact was visible almost immediately. Young people who, in the previously existing scenario, would not have reached any kind of impressive earning capacity before their mid-thirties began earning hitherto unheard-of salaries at the ages of 20-24.
This, coupled with the traditional desire for home ownership and ready availability of home loans, had a 360-degree effect on the requirement for homes in Pune. It also had an impact in terms of locations.
IT/ITES companies prefer to set up shop in the less expensive outskirts of a city, and people who work in these industries prefer to live close to their workplaces. With the emergence of Hinjewadi, areas around it suddenly sprang into sharp focus and demand for more central areas began slowing down.
The effect of the It revolution on Pune’s real estate market has indeed been tremendous. Today, Pune’s developers are catering to an entirely different set of demographics than they did 15-20 years ago.
The onus is now large flats with ultra-modern amenities, and on locations which offer fast access to the city’s IT hubs. Simultaneously, the MIDC in Pimpri-Chinchwad is boosting demand for homes in its vicinity, driven by well-paid employees from those industries.
Today, the annual demand for homes in Pune is close to 46000 units, where it was less than 20000 units per annum just 15-20 years ago. While Mumbai is staggering under the weight of unsold units all across the city, supply and absorption of homes in Pune continues to make both property development and property investment eminently viable.
Even in such a vibrant market environment, Pune’s property rates remain relatively rational….home ownership in this city is a dream which can be translated into reality.
Despite their proximity to each other, Mumbai and Pune are two very different markets. Mumbai’s legendary space crunch has made residential property there exorbitantly costly, driving more and more aspiring middle-income home buyers to the outer fringes.
Meanwhile, Mumbai continues to grapple with its notorious infrastructure deadlock. Prices in most areas of Mumbai have stagnated and there is considerable pressure from the market to bring them down. If Mumbai does see a correction in prices – which is very likely in the near future – its residential real estate market will pick up pace again.
On the other hand, Pune’s residential property market has maintained its momentum even in a challenging economic environment. Various research agencies have confirmed that Pune has prevailed as one of the best-performing residential real estate markets over the past two years.
Residential sales have remained healthy enough to sustain the viability of the city’s real estate market, encouraging Pune’s developers continue to launch fresh residential projects in all budget categories – affordable housing, mid-income housing and even in the super-luxury category.