What Lies Ahead For The Pune Property Market

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

Pune’s real estate market is the stuff of legend, and justifiably so. All the five main verticals of the property sector – residential, commercial office space, retail and hospitality – are performing optimally in Pune.

This is by all standards an exceptional real estate market. Moreover, Pune is always growing and adding to its geographical spread, making it by far the largest and most vibrant real estate market in Maharashtra and beyond.

Therefore, it comes as no surprise that investors from Mumbai, dissuaded by the high property rates and slow market conditions in the financial capital, are extremely active in Pune.

Apart from these, there is a constant flow of investments coming in from other Maharashtrian cities like Nanded, Nasik, Sangli, Kolhapur, Nagpur, Jalgaon and Amravati. As a result, the Pune property market is extremely resistant to stagnation.

Know what drives demand

The huge degree of job creation the city’s manufacturing, automobile and Infotech and services sectors is causing inward migration from almost all parts of India and very rapid absorption of commercial office spaces.

This, in turn, is constantly ramping up residential property demand as well. Additionally, thanks to its many educational institutions, Pune boasts of constantly replenishing talent pool which fuels the growth of all the sectors active in the city.

Because of the multidimensional growth drivers that the city enjoys, the Pune residential property market is quite resistant to the severe demand fluctuations being seen in a number of other cities.

However, successful investment into the Pune residential real estate sector still calls for knowledge about what works, and what doesn’t.

Pune_India

Know where to invest

Like in every other city, Pune’s residential property sector sees the most rapid impetus in pockets or locations that are still developing. It is primarily in these emerging locations that we find the most real estate activity, both its terms of development and demand from buyers.

Areas like Undri, Ambegaon, Keshavnagar and Bhugaon have already established themselves as Pune’s fastest-growing new suburbs. The growth of such locations also serves the important purpose of decreasing demand and development pressure in the central regions. However, even in these areas, there is danger lurking for uninformed property investors.

In many of the emerging residential property destinations, we have seen a huge load of housing projects where construction has either been stalled or delayed far beyond the initially committed completion timelines.

Investors and end- users who bought into such projects at the pre-launch phase to take advantage of attractively low rates have literally become stuck along with the projects.

Know your developer

In Pune, the difference between beneficial and hazardous housing investment lies primarily in the reputation and credibility of the developer. While credibility is a much-abused qualification that almost every developer lays claim to, it is actually quite simple to verify.

One merely needs to examine the builder’s track record of successfully completed housing projects. ‘Successful completion’ does not mean ‘eventual completion’, but completion within 1-1.5 years of the delivery timelines promised to buyers.

RERA Compliance – the new Gold Standard

With the Real Estate Regulatory Act (RERA) slated to finally become a nation- wide reality by mid-2017, Pune’s residential real estate market is going to become more vibrant and lucrative for property investment than ever before.

Thanks to this key reform in the real estate sector, the city is set to shed a lot of its ‘bloat’ – or burden of small-time, inexperienced builders out to make a quick buck with small, shoddily designed and executed projects which are also often of dubious legal status.

Such players will simply not be able to sustain operations post-RERA, and will vanish from the market.

What will remain are builders of good repute, market standing and track record – credible players who are able to abide by the strictures that RERA lays down to protect the interests of buyers and investors.

While this landmark is understandably a source of fear and trepidation for fly-by-night builders, it heralds the even more powerful emergence of strong, credible developers.

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 projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

How Education Influences Pune’s Property Market

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

Jawaharlal Nehru named Pune the Oxford of the East, and this title is more than well-deserved on account of the many schools, colleges and management institutes that the city boasts of. Each year, Pune attracts tens of thousands of students not only from India but all over the world.

A lesser-known fact is that Pune’s real estate market is a direct beneficiary of its highly developed educational environment. People in Pune are willing to invest considerably in their children’s education, and this includes a willingness to pay more for a home located close to a good school or college.

In fact, if we study the check-lists of features that most homebuyers in Pune consider important, more than 35% list proximity to good schools and colleges non-negotiable.

Also most of the migrants from other states generally fall in love with Pune and settle here. This also leads to demand for more houses  near the proximity of the schools as this is a most logical step for anyone to raise a family.

Not only that, but a significant number of homebuyers – predominantly young working couples – are willing to compromise on other aspects such as proximity to entertainment and even workplaces in order to secure a home close to a good school.

For these people, the welfare of their children ranks higher than their own convenience. What is even more interesting is that not all of these homebuyers are married or have children. Why do such buyers consider proximity to good educational institutions important while selecting a property?

The answer is as simple as it is profound. On the one hand, married homebuyers with children are definitely interested in quality schools and colleges because of the educational opportunities they offer. Such homebuyers have either just starting a family or are planning to do so soon.

Either way, they are considering the future of their children and are even ready to pay more for smaller homes in order to secure their chances of a good education.

In the larger context, however, most property buyers and investors in Pune understand that the availability of good schools in a neighborhood contributes directly to the overall value of the locality’s real estate.

Obviously, Pune’s educational districts rank very high as property investment destinations. This is underscored by another very interesting fact – namely, the resilience of the property values in areas of Pune which are close to the good schools, colleges and management institutions.

child in school

In the past, these areas did not see any drop in property prices even when other localities were seeing price corrections.

Historically, homebuyers focused on these areas of Pune were willing to make all kinds of compromises in order to secure the education advantage. They were ready to settle for smaller homes in projects without clubhouses and swimming pools, in congested areas without malls or any kind of organized shopping nearby.

Over time, these constraints have given way to some extent. Developers who were able to secure redevelopment rights in some of the core areas of the city were able to build more modern residential complexes which have a decent share of lifestyle amenities.

While examining the correlation of Pune’s educational institutions and the property pricing in the areas around them, some may argue that good schools and colleges have led to the higher appreciation of these areas.

The rationale would appear sound – homebuyers in Pune will always prefer residential projects located near an educational district and are ready to pay higher rates for them. So have Pune’s good schools, in fact, helped drive up the property prices in these localities?

Maybe so, but this is an incomplete argument at best. The fact remains these areas are also defined by higher historic affluence and that this affluence has triggered the development of high-quality schools there. There is no doubt that in Pune, the best schools and colleges are in localities defined by a higher standard of living.

In the final analysis, what perhaps matters most from a property market perspective is not the nature of the relationship between education and property values in Pune, but the simple fact that the relationship definitely exists.

Developers with projects in and around Pune’s educational institutions are able to ask for higher prices, and homebuyers are generally willing to pay them.

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 projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township, Astonia Royale in Ambegaon.

Should You Invest In Property In Another City? 

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

The understandable tendency of most property investors in India is to focus on the cities that they actually live in.

This is because they are already familiar with which locations see the highest demand and who the reliable and reputed developers are. Also, most people will have a fairly broad network of others people within their city who can advise them on potential property investments.

Yet, the Internet has opened the larger real estate playing field in India up more than ever before. A simple online search involving the keywords ‘buy home’ or ‘buy property’ will yield thousands of results from across the country.

And the trend is no longer limited to people who own computers – rapid smartphone penetration has opened up the Internet to a staggering number of people today.

According to a survey by Indiaproperty.com, the availability of user-friendly app’s and improved website designs have led to mobile-based property searches growing three times faster than PC-based searches.

This survey also established that real estate searches in Tier II cities, which have seen very fast smart phone penetration over the last few years, have grown 1.3 times over the national average.

The real estate data available for these cities is obviously available to all ‘netizens’. In other words, a larger number of geographies than ever before are drawing the attention of property investors.

For instance, Pune is a high focus area for real estate investors from Mumbai and Bangalore because of its amenable property prices, favourable appreciation statistics and the fact that properties in all budget ranges are available.

But how advisable or even safe is it for a non-resident to make a real estate investment in a city that he or she is not familiar with?

This question becomes even more important when one considers that the best prospects in terms of lower property prices and better appreciation are in such a city’s emerging corridors rather than its established real estate precincts. The first thing such a prospective investor needs to do is establish what kind of demand is driving such a location.

The primary driver for residential demand is job creation – if an identified city, town or periphery is seeing a lot of demand for homes from people who are attracted by a good job market, then it can be said to be a good residential property investment bet.

The other important variable is affordability. Quite a few non-metros as well as peripheral areas of larger cities currently qualify on these parameters.

Again taking the example of Pune – this city is classified as Tier II, but has a remarkable configuration as far as economic drivers are concerned. Pune’s economy and job market are driven by Information Technology and BPO firms, its vast manufacturing belt and a thriving services sector.

The steadily increasing demand for budget homes from employees working in all these sectors has resulted in a veritable real estate boom in fast-developing locations like Undri, Ambegaon, Wagholi and Bhugaon.

Amit's Astonia Royale in Undri
Amit’s Astonia Royale in Undri

However, these areas are being developed by both large organized builders with a strong market reputation and unknown small-time players with no verifiable track record. The question that any investor needs to ask in such a scenario is who to trust. This brings up the second important factor for an investor to focus on – namely which projects to invest in.

One of the aspects to be fully investigated is the reliability and market standing of developers active in such a market. Though the recently announced Real Estate Regulation bill will eventually weed out all fly-by-night operators, the fact is that many unscrupulous developers have historically been active in emerging locations.

Such developers may not have obtained all necessary clearances for their projects or even have clear ownership of their plots. They may also engage in shoddy construction, and often lack the capitalization to see their projects to timely completion. Buyers are attracted by the lower property rates they offer in order to attract demand.

However, due to the high demand driving the real estate market in such locations, many reputed developers who have been delivering quality projects on time for a long time are invariably also active there. Investors should only patronize such developers so that they can avoid unforeseen risks to their investments.

It definitely makes sense to consider cities other than one’s cities of residence for property investment, especially if one’s own city does not yield very attractive returns on investment.

Investors from Mumbai are so active on the Pune real estate market because while property price appreciation all over the financial capital has been next to flat for over three years, neighbouring Pune has been seeing property price growth of at least 15-18% in many of its emerging areas, and rental demand in the city is also very high and increasing constantly.

Property investments in other cities should be done after a lot of research and preparation, but they can definitely be extremely profitable for those who do their homework.

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 Mediterranean-style township Astonia Royale in Ambegaon.

Innovation Keeps Pune’s Property Market Vibrant

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

Innovation is a crucial business concept today, and a major differentia for real estate developers as well.

Without implementing new ideas and concepts in building homes, developers cannot set their offerings apart from the competition. Just as fresh concepts and designs attract shoppers in the retail world, residential projects with attractively innovative features draw home buyers looking for something new.

The need for innovation on Pune’s residential real estate market has not gone unheard. The definition of ‘quality homes’ is constantly changing, and developers cannot afford to adopt a cookie-cutter approach to project development. In today’s market environment, there is always enough supply on the market to force them to remain competitive by offering fresh designs and project features.

In the premium segment, developers have been roping in reputed Indian and foreign architects to introduce designs and features that are immediate attention-grabbers.

Most of Pune’s luxury home buyers travel the world constantly, and are constantly exposed to new residential concepts in the more developed countries. As a result, they seek a global feel to their homes, and imaginative new designs in residential projects are therefore very popular in the luxury segment.

Amit's Sapphire Park
Amit’s Sapphire Park

Sustainability has been another major agent of change and innovation on Pune’s property market. Today, the popularity of ‘green’ homes has transcended the luxury label, and become an operative watchword even in mid-segment housing.

Apart from offering green features at the unit level, many of Pune’s progressive developers have also begun using new methods of eco-friendly, high-grade construction methods in their projects.

Given the increasing awareness about environmental issues among Pune’s citizens today, the use of new construction technologies that replace wasteful and environmentally harmful processes has become an important differentiation for developers. More and more home buyers are now choosing properties that are aligned with the ethos of environmental sustainability.

Interestingly, innovation does not always mean introducing something new. It can also mean retaining desirable aspects that are vanishing elsewhere in the markets.

For instance, we have not seen balconies and open spaces vanishing from new projects in Pune, even as such features are becoming extinct in neighbouring Mumbai.

To be able to deliver such features despite the escalating costs of land and construction, Pune’s developers are constantly experimenting with new project designs that use available space more optimally.

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 Mediterranean-style township Astonia Royale in Ambegaon.

Investment In Pune Property Market Remains Rewarding

Kishor PateKishor Pate, CMD – Amit Enterprises Housing Ltd.

What makes Pune such an attractive property investment destination, despite the fact that Mumbai – India’s legendary real estate par excellence – is right next door? A few years ago, the reasons for this were not as obvious as they are now. Today, they are – more than ever.

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.

It is true that residential sales have slowed down even in Pune. However, it is also a fact that they have remained healthy enough to sustain the viability of the city’s real estate market. This is why 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.

Thanks to the sustained viability of the Pune property market, it will not see a price correction. The excessive speculative investment activity which caused prices to rise faster than they should have in earlier years has now been curbed. Pune’s developers are now actively discouraging mass purchase of units to speculative investors so that the market retains its rationality.

Sahakar Nagar Pune

The investors who remain are operating from sufficiently wide investment horizons. This means that they will hold on to their properties for at least 3-5 years before they will put them on the resale market. In the interim, they are content to earn very satisfactory rental incomes from their properties. Property investment which is conducted in such a manner does not cause the wild price fluctuations and erratic supply patterns that speculative investment does.

Pune is a property investment market that provides options to wide spectrum of investment budgets, as the city has a steady supply of options in all price brackets. Meanwhile, the city’s eminently healthy rate of employment generation – especially from the IT/ITeS, manufacturing and automobile sectors – ensures demand and property purchasing ability.

Even in high-ticket luxury housing, the investment potential in Pune is high and rising. Similar to Mumbai, luxury housing in Pune has its own segment of wealthy buyers as well as its own upper-crust residential locations.

The future supply in these prime locations – which include Sahakarnagar, Prabhat Road, Boat Club Road, Kalyaninagar and Koregaon Park, is extremely restricted due to lack of land parcels. Prices in these elite neighbourhoods will continue to rise as the available stock is absorbed. This will ensure that investment in Pune’s luxury housing segment will continue to be extremely attractive.

Quick Tips On Investing In A Property In Pune

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

Should You Buy Or Rent?

People either buy or rent apartments for different reasons. Obviously, it makes sense to rent if one does not intend to settle down in a particular city or area within that city, or if one’s financial circumstances do not support home purchase even via a home loan.

Even if one’s financial status does support the purchase of a mid-segment home, renting is usually the only option if one wishes to reside in a high profile area where property prices are very expensive.

However, if all the circumstances are right, purchasing a home is something every Indian should and does dream of. Owned property is the ultimate investment. Home ownership provides not only shelter and security to one’s family, but also a justified sense of pride.

If one is happy in a certain location, it makes much more sense to pay monthly EMIs towards one’s own home rather than monthly rental, which bring no returns at all.

Can You Face Problems In Getting A Home Loan?

While attempting to procure a loan, customers can certainly run into difficulties. One of them can be lack of eligibility or a bad credit score.

If the bank is not able to satisfy itself that the client has the ability to repay a home loan for any reason, it may ask for more documentation and guarantees or even refuse the loan altogether. This can happen with clients from certain professions which banks perceived to lack steadiness.

Other difficulties which a client can face is not being able to produce all the documents required for home loan approval, or the bank refusing to provide a home loan for purchase of a property which is over-priced, does not have a clear title deed or is in a project for which the developer did not obtain all the necessary clearances.

Things To Check Before Taking A Home Loan

The first thing to be checked is one’s own eligibility for a home loan, and one’s ability to service such a loan consistently. Clients should remember that a home loan is a significant long-term financial commitment.

If these factors are in place, the client should check the rate of interest that a bank is quoting for fixed as well as floating rate-based home loans.

Secondly, one should establish whether the bank has a reputation for flexibility when it comes to renegotiating home loans. It makes sense to contact other people who have availed of home loans from the same bank whenever possible, and to ask them about their own experience.

As a general rule of thumb, the monthly EMI being paid on a property should not exceed 40-45% of the family’s total monthly income after all other loans or recurring financial commitments have been accounted for. If it exceeds this, the likelihood of defaulting on the home loan increases significantly.

Vehicle loans should be paid off within the shortest tenure that banks permit, which is usually three years, and should be prepaid whenever finances permit.

A family should also make sure that it has medical insurance for all family members, and with sufficient coverage for unforeseen medical emergencies, as these can be extremely expensive.

AEHL-proect

How To Arrive At Your Property Purchase Budget

The budget for property purchase should be finalized on the basis of:

• Available savings (which will decide how much down-payment can be made on a home loan)

• Current family income and reasonable expectation of increase in income (based on annual salary hikes)

• The family’s current requirements in terms of space and facilities, and the increased requirements in the future (based on family growth, elders expected to come and live with the family, etc.)

How Has Pune Real Estate Been Affected By The Current Economic Scenario?

Every property market in India has been affected by the changing economic environment to some extent. The cities that have been most affected are those which do not have sufficient economic activity.

The property markets in such cities are affected more by economic downturns because there are not enough well-paying jobs being created. In other cases, the available property stock in the city is over-priced and not affordable to most home buyers.

Pune’s property market also saw a certain degree of slowdown, but it has done much better than most other cities in India because of two important factors:

• Pune has three major industry segments to support its economy – manufacturing, Information Technology (IT), Information Technology-enabled Services (ITeS), industrial and automobile manufacturing and the services industry. These industries have consistently been creating sufficient jobs with good salaries, and this factor supports the property purchase rationale.

• High competition among developers and a healthy supply of projects has ensured that Pune’s property prices have remained affordable to home buyers. Another factor that has maintained affordability is that Pune’s real estate market is mostly driven by end users and not speculators. Though there is also investor activity, investors are not able to quote exorbitant prices because Pune is a price-sensitive market and will therefore not accept unnatural price escalations.