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.

Pune Real Estate: The Year That Was, And The Year Ahead

Kishor Pate, CMD – Amit Enterprises Housing Ltd.

2016 did not bring as much cheer to Pune’s real estate market as previous years had. Nevertheless, Pune outperformed Mumbai by between 20 to 25% in terms of overall sales.

The highest-selling category in Pune was mid-range properties priced between Rs. 35-50 lakh within the city’s municipal limits and its nearby periphery, followed by lower budget housing on the outskirts priced between Rs. 15-30 lakh.

The latter pricing category offered on the market saw some response; however, whether it sustainable is debatable.

The questions which bothered most buyers in 2016 were:

  • What are the hidden cost?
  • Does the location serve my purpose?
  • Will the project I am interested in be completed as per promised timeline?
  • Is the developer inherently RERA-compliant?

Due to these completely understandable apprehensions, reputed builders saw the most number of serious inquiries in 2016. It would not be an exaggeration to observe that the year saw developers being examined with microscopic scrutiny.

There was clear evidence that Pune’s property buyers have become very aware of their rights, and that they can expect their interests to be protected by the upcoming RERA; promoters will not be able to dictate terms as they so far have.

However, irrespective of the potential protection that RERA will provide, buyers were more focused on the reputation of the builder than prices.

This was a significant change of temperament among Pune’s traditionally price-sensitive consumers. It indicated that long-term investment value and growth now matters more to them than short-term savings.

More than ever before, the inherent value of sticking to players with an established track-record will make itself felt in 2017.

When RERA becomes a nation-wide reality in mid-2017, Pune’s established developers with a good track record quality products and transparent dealings via official financial channels will emerge as dominant.

Once the Real Estate Regulatory Bill kicks in, fraudulent builders will be pulled off the market, and there will be more clarity than ever before about the genuine opportunities that Pune’s real estate market offers.

For the entire year of 2016, Pune remained a buyers’ market and primarily end-user driven. Developers vied with each other for customers in most locations – a ‘competition’ in which only those with projects nearing completion emerged as clear winners.

High buyer caution prevailed throughout the year with regards to pre-launches and under-construction projects in the earliest stages of development.

With many projects offering ready-to-move options to buyers and investors, the thought of having to wait for 2 to 3 years before gaining possession simply failed to entice.

The locations which scored highest with buyers in 2016 were not the overpriced central locations, but those which offer good connectivity to Pune’s various workplace hubs while circumventing the steep price points of the city’s central areas.

property investment

Most buyers had a firm list of must-haves to refer to:

  • Proximity to the city’s various workplace centers; good overall connectivity via roads and public transport
  • Rational property prices
  • Availability of good schools, affordable healthcare, shopping and entertainment
  • Market-proven reliability of developers’ brand

In terms of location, Undri-Pisoli in Pune’s south-eastern sector was a clear favourite with buyers employed in the city’s Infotech sector and manufacturing industries, as all the requirements were available as above,

Also Ambegaon in the south-western part saw a lot of conversions, thanks to its good connectivity to Mumbai as well as onward to Satara and Kolhapur.

Apart from the fact that these locations are extremely well-connected, they also drew demand because they have a good supply of completed projects by reputable developers.

Fast-paced infrastructure deployment also helped bring these two locations to the top of the charts in 2016, and will continue to sustain their desirability in 2017.

Bhugaon, Keshavnagar and Manjri in the city’s eastern quadrant saw a lot of absorption because of overall access they provide to various key areas of the city. Though they are still emerging in terms of general infrastructure deployment, these are certainly locations to watch in the future.

In terms of general pricing, Pune saw a correction of 3 to 6% in property prices in most markets. Most developers rolled out additional schemes to attract buyers to their projects, with varying degrees of success.

Construction-linked plans drew some interest, but the clear winners among such schemes were all-inclusive packages which included all statutory costs such as VAT, stamp duty and registration fees.

Buyers showed a lot of preference for transparency in pricing, a decent saturation of in-project amenities and facilities, and developers whose trustworthiness was not in question.

2017 will be a year of significant and much-needed change for Pune’s property market. The Government’s demonetisation initiative has kick-started a process of elimination of fly-by-night developers and the cash components in the transactions will come to an end- a process which the final implementation of RERA will bring to culmination.

There will be a lot of consolidation throughout the year, with such players yielding whatever marketable land parcels and incomplete projects they hold to more established players.

2017 will not bring any further correction in Pune’s residential property prices, as demand is already returning in force to the city’s property market. Also, the fact that RERA will bring with it a significant additional financial burden on developers with regards to various statutory compliances, prices may go up towards mid-year.

Nevertheless, the year ahead will be favourable for property buyers in Pune. It will continue to be a buyers’ market, and the relationship between developers and buyers will see a major upgrade because buyers’ rights and interests will be well-defined and well-protected by the new Real Estate Regulatory bill. This is what the Government wants to achieve.

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.

Wait For The Real Estate Regulator Bill (RERA) Or Buy Now?

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

Across the country, aspiring property buyers are waiting for RERA – or the Real Estate Regulation Act – to be implemented by the States.

Time and again, it has been stated that the consumer must consider the reputation of the builder prior to taking a decision to buy a property/asset which is likely to remain for generations.

On implementation of RERA, only builders with sound reputations will remain in the fray – this probably its most important function in protecting consumer rights and interests.

Once RERA becomes a enforceable law, it will change the ways in which residential housing projects are planned, offered, sold and possessed across India. Property buyers will no longer need to worry about unfair contracts, delayed possessions, non-notified alterations in building plans and other risks.

The aim of RERA is to make real estate purchase simpler by bringing in better accountability and transparency. In doing so, it will also infuse a lot more confidence among buyers – who, at the end of the day, should feel as comfortable about investing in a home as they are about buying gold.

RERA lays forth several ground rules for real estate buying and selling, including:

  • Registration of every real estate project with the appointed tribunal (with some exceptions). Non-registered projects cannot be offered for sale or booked by promoters.
  • Mandatory uploading of project details by the developer on the RERA website, including layout planning and completion schedule.
  • 70% of the advance collected from buyers needs to be maintained in a separate bank account and be used only for the stipulated project construction. These funds cannot be hived off for other purposes – a practice that has contributed majorly to delayed projects in the past. The individual state governments have reserved the power to alter the amount, but the principle is very much in place.
  • Establishment of Real Estate Appellate Tribunals that will handle any issues related to property disputes, with the intention of delivering quick and unambiguous resolution.
  • Setting up of an advisory body to deal with matters related to government-sponsored real estate development.

In one of the most important addendums to RERA, real estate brokers and the way they conduct their business now also fall under its ambit. The days of unscrupulous property agents either acting solely in their own interest or in collusion with developers are now numbered.

In fact, RERA will protect both the buyer and the seller – for instance, it protects developers from non-payment. While the promoter is required to obtain necessary documentation such as the completion certificate, the buyer is liable to be fined for delays in payment. Failure to register the property or comply by other regulations of the Act will lead to hefty fines and even imprisonment in certain cases.

All this may sound too good to be true – and in fact, it is for now because RERA is likely to come into full force from May 2017. All the individual state governments need to get their ‘acts’ together to comply with its requirements and adopt it.

The good news is that they do not have the option of not doing so – the Central Government has amply demonstrated that it is determined to push the Real Estate Regulation Bill through come hail or high water.

The Indian real estate market is currently showing positive signs of revival. Even as smaller builders struggle – now also because of the recent demonetization of larger currency notes – credible developers continue to launch new projects and raise funds to meet the committed completion timelines.

With RERA in place, several not-so-credible developers will go out of business. Buyer will be protected from players with ulterior motives – in short, fly-by-night operators. This will, in turn, infuse a much-needed positive sentiment among buyers and consequently help increase demand.

Increased sales will improve the cash situations of the credible developers that remain after the weeding out, and projects will be automatically delivered in time.

real estate law

Should You Wait For RERA Or Buy Now?

At the current point in time, because of the lower demand seen over the last 2-3 years, property prices across India’s major cities have sunk to incredibly low levels. Buyers have a wide range of options in locations, budgets, amenities and – perhaps most importantly – in developers.

In previous times, buyers with budget constraints could only consider projects by builders with doubtful reputations and questionable business practices. This is no longer the case – today, a home in a quality project by a trustworthy and reputable developer is very much an option even within a modest budget.

RERA will take another year to be implemented; meanwhile, there are other dynamics which are changing on the Indian property market. Reduced pricing coupled with attractive deals in most cities, and the fact that more and more fence-sitting buyers have run out of patience and are coming onto the market with firm ‘buy’ decisions, have kick-started the modest but very real recovery we are seeing on the residential market.

In Pune, we have witnessed a 25% increase in buying activity in high-demand areas like Undri-Pisoli, Ambegaon, Bhugaon and Wagholi in the last 4-5 months alone. In Mumbai, buying activity in Navi Mumbai, Thane and some other relatively affordable areas has also picked up significantly.

What does this mean for property buyers? Very simply – any revival in buying activity eventually leads to increased prices. Such is the immutable law of demand and supply. Given that demand is increasing steadily even now, property prices will begin rising even before RERA becomes a market reality next year.

What Experts Say

Industry watchdogs unanimously agree that there is no scope for current property prices to decrease further. Whatever correction in prices could happen has happened, and developers cannot reduce prices further even if they wanted to – doing so would, in many cases, seriously impact their ability to stay on the market.

In fact, RERA will mean that promoters will be bound by more procedures, and this may increase the cost of their projects – costs which are likely to be passed on to the consumer. In other words, RERA could be instrumental in inducing cost escalations in many cities.

It should be noted that while RERA will ensure that unscrupulous developers and their business practices will be driven off the market, it will simultaneously ensure that builders with sound reputations and impeccable track records will become stronger.

One of the most important intentions of the new law is to support such developers so that they can continue to serve the needs of property buyers in the wholesome and transparent manner which they are known for.

In short, for buyers who have no intention of dealing with any but the most reputed developers, there is no real advantage in waiting for RERA to kick in. If one is working with a reputed developer, the privileges, benefits and safeguards that it will bring already apply today.

Another valid argument against waiting for RERA before buying a property is that that once the Act is in place, it will become mandatory for builders to invest extra time with regulatory bodies to work along the extensive details of construction plans, clearances, approvals and other details related to their new projects. Paradoxically, this will in fact result in delayed deliveries where the opposite effect was actually intended.

Even though many buyers feel that they should wait for RERA to be implemented before buying a flat, the fact remains that there are already many builders with strong reputations and credible market practices.

Buying a property from such a player now instead of later can turn out to be wise decision if RERA results in upward pressure on prices. Also, if one is looking to make the most of current attractive pricing and offers, there is actually no better time than now.

The time and effort spent in taking advantage of the favorable market dynamics existing today will prove to be the soundest investment. The sole proviso is that one should only patronize a reputed developer with a good track record for delivery and construction quality.

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.

What The Real Estate Regulatory Bill Will Do For Home Buyers

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

Now that the Real Estate Regulatory Bill has been cleared for take-off and will be an enforceable law soon, the question that buyers are asking is how exactly they will benefit from it.

This is a fair question, considering that RERA (the Real Estate Regulatory Act) was primarily formulated for their protection and in their interests. Let me answer it as clearly as possible, without sacrificing on the necessary details.

One of the most important things that RERA will do for home buyers is to reduce their uncertainties when it comes to planning their finances around a home purchase. If we assume that a buyer has booked a flat admeasuring 1,000 square feet, and that the developers has promised possession in three years.

A flat of such dimensions (1000 square feet) in a location which is close to the city centre, or has good public transport connections to it, would potentially earn its owner anything between Rs. 1.5-2.5 lakh per annum.

If the developer keeps his promise and delivers the flat in the stipulated time, the buyer would be able to put the flat out on rent and draw an income from it to offset his home loan expense.

However, if the developer fails to deliver the property in three years and extends the delivery by a year or more without providing compensation for the delay, the buyer’s finances are thrown seriously out of whack. The Real Estate Regulatory Bill will safeguard property buyers from such eventualities.

In the latest amendment to RERA which was accepted in the final draft, real estate agents are also covered under its purview. Effectively, this means that property agents can no longer engage in deceptive promises, charge excessive brokerage or fail to perform their full duties in a property purchase. They will be held accountable for any deficient service or failure of omission or commission.

RERA will also ensure that home buyers will not be cheated on the promised layout, and that amenities and fittings will not change along the way. Notably, such unforeseen and unscheduled changes were a recurring nightmare and grievance for home buyers in the past.

real estate law

With RERA in force, the developer will not be able to make any changes in the layout, dimensions, amenities, facilities and fitting which were agreed upon at the time of signing the sale deed.

If they still occur, affected buyers can appeal to a tribunal which has been specifically instated to address such incidences, and be assured that punitive or corrective action will be taken against the developer.

Also, RERA will require developers to quote their asking rates on carpet area instead of super built-up area, which has so far been the norm. This aspect will take some time to be fully implemented, as it is a huge change which will require countless developers to recalibrate their rates.

There are many more facets to this Bill which will work in favour of property buyers, but the above clearly indicate that property buyers are soon going to stop being victims and will in fact be much more in full control of their property investments.

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.