July 10, 2023: After witnessing growth in the past in terms of sales and new launches, the markets have streamlined at sustainable levels, mentioned the June 2023 edition of The Gera Pune Residential Realty Report released by real estate developer Gera Developments. The bi-annual report is for the period January to June 2023.
According to the report, prices have increased by 11% across all projects over the last 12 months. Although new launches and sales have reduced, the replacement ratio remains healthy at 0.98, indicating that the sales are marginally more than new inventory added. The total inventory under development across the Pune region has reduced by 5% from 3,15,088 to 2,97,801 homes. This constitutes 23.36% of the total inventory available for sale.
In the past few years, the supply squeeze that was prevalent in the Pune residential realty space had led to developers launching new units to meet demand. However, according to the report, this time around new supply has reduced by 16% to 46,007 units in the six months ended Jun ’23 compared to the 54,845 units that were launched during the six months ended Jun ’22, indicating that new launches while still at a healthy level, are being normalised to the steady state seen in the past.
The report highlighted that the steepest drop of 23% is in the premium segment (prices between Rs 5,833 per sqft and Rs 6,998 per sqft). This is followed by the premium plus segment (prices between Rs 6,999 per sqft and Rs 8,748 per sqft). The lowest drop of 8% in new launches is in the luxury segment (prices above Rs 8,748 per sqft). This drop to 93,734 units, though lower than the last year, is higher than earlier years.
If one were to examine fresh supply zone wise, the premium city centre (zone 5) has seen a reduction in fresh supply by 13% to 4,422 units while PCMC (zone 6) has seen a reduction of 10%. Overall, there has been a reduction in fresh supply across the board.
However, operational metrics like the replacement ratio which is at 0.98 and inventory overhang don’t point to any red flags in the near term.
The total inventory available for sale has reduced by 7% to 69,553 units as on Jun ’23 compared to Jun ’22. The current inventory available for sale stands at a reasonable level of 23.36% of total homes under development.
The total inventory available for sale has dropped by 0.6% at a six-monthly level and now stands at 7.66 crore sqft while the value of that inventory has increased to Rs 48,393 crore. The sales volume has decreased by 8% over the last 12 months and 12% on a six-monthly level.
The market continues to trend towards larger projects (those with more than 500 units). The number of large projects in Jun ’18 was 115 projects, it has grown to 174 in Jun ‘23. The % share of such large projects to the total projects being developed has also increased from 3.3% in Jun ’18 to 7.8% in Jun ‘23. Looking at the total inventory distributed across small projects (less than 100 units) only 11% of the total inventory is in this segment. This used to be 30% six years ago. In contrast, large projects (more than 500 units) now constitute 13% of the total inventory in Pune.
Affordability levels continue to be very strong at 3.84x annual income. After trending down consistently post the 2015 peak in prices, home loan interest rates have recently started rising (since Jun ’22). The combined increase in interest rates from 7.7% in Dec ’21 to 9.85% in Jun ’23 and prices from Rs 4,926 per sqft to Rs 5,782 per sqft have impacted affordability, which has shown a dip over the 3.61x levels in Jun ‘22.
Rohit Gera, managing director, Gera Developments, said, “The Pune real estate market is showing dual signs of both boom and consolidation at the same time. The prices have gone up 11.03% from Rs 5,208 per sqft in Jun ’22 to Rs 5,782 per sqft in Jun ’23. There has been an across-the-board increase in the rates of new projects, existing phases of old projects as well as new phases of old projects. This indicates a strong demand as home buyers have purchased homes at higher prices than ever before. On the other hand, the overall sales for the past 12 months have come down by 8% from 1,05,625 units in the period Jun ’21 – Jun ’22 to 97,214 units in the period Jun ’22 – Jun ’23. This could be explained by the increase in home prices and increase in interest rates. The increase in prices and a corresponding reduction in demand are normal indicators of a bull market.”
Gera added, “The trend that has continued though is that of the increase of average size of projects, reduction in the number of projects of smaller sizes, greater dominance of projects from larger developers. Looking forward, there are a couple of scenarios that could play out. If developers bring in substantial supply, we could be in an oversupply scenario since sales numbers have eased off from earlier highs. On the other hand, constrained supply at the current equilibrium levels could see a continued steady rise in prices.”
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
