By: Om Ahuja, CEO – Residential Services, JLL India
Track2Realty: Pune is no longer the small city whose only claim to fame was its proximity to the country’s financial capital, whose real estate market survived on rural demand emerging from the hinterlands of Maharashtra.
Today, the perfect blend of its manufacturing and services sectors make Pune a standalone economic powerhouse in all respects, with a rate of job generation that is hard to match. At rapidly increasing pace, the city’s internationally reputed educational institutes attract young talent from all corners of India, providing Pune with a natural feeder of talent to its growing industries.
The snide ‘Mumbai’s sidekick city’ tag has long since lost its validity – Pune now houses large corporates that have no linkages to Mumbai whatsoever. Nor can it by any stretch of imagination be called a mere ‘Pensioner’s Paradise’ anymore.
While Pune is certainly a highly preferred retirement destination, the youthful element that really drives the city is hard to miss. Meanwhile, the fact that it is now a leading hub for avant-garde senior living complexes has taken its reputation as a retirement haven to a whole new level.
Revving commercial real estate dynamo
Pune’s emergence from the shadows of its heavyweight neighbour happened because of the almost orchestrated growth of its IT/ITeS, automobile and manufacturing industries. All these industries are booming today. The city’s impressive commercial space absorption statistics provide a reliable indicator of the generated employment, as well.
Factoring in that Pune saw approximately 4.7 Mn sq. ft. of Grade A office space leased in 2013, and using the rule of thumb that every 100 square feet result in one generated job, Pune generating 47,000 jobs or more in 2013.
The compounded annual growth rate of job creation over the last five years has been in double digits – setting a pace that indicates that Pune will soon overtake larger metros like Mumbai and become one among the five key cities of India.
Commercial office space leasing in Pune currently accounts for over 17.40% of the total market share in India.
The generation of 47,000 jobs in 2013 was not an exceptional occurrence. Even in 2010 – nobody’s candidate for ‘Boom Year of the Decade’ – Pune witnessed very healthy commercial office leasing trend. Pune was no longer being seen as an alternate destination to Mumbai to save on costs, but as a preferred one-stop-shop for every corporate’s needs.
The list of large companies that have taken up over 40,000 sq. ft. of office space in Pune over the last 18 months alone includes Accenture, TCS, AXA, Barclays, Inautix, Calsoft, Bitwise, C-DAC, ZF Associates, Harman, Symphony, DSTW, Semantics, Mastercard, Credit Suisse, Siemens, HSBC, Volkswagen, PWC, Quintiles, Compucomm, ADP, Flextronics and Yardi Software.
Apart from the service industry, Pune has cornered a massive share of the manufacturing pie. Companies that have expanded or set up large manufacturing facilities in and around Pune city over the last 18-24 months include GE, Sandvik, Case New Holland, Global Group, Mahindra Gears, TACO, KSH, Real Team, SCA Hygiene, Berger Paints, Indiana Gratings, Kone Cranes, Alfa Laval, Danobat, Mars, JSW Steel and Henkel. Chakan in the Pune’s Pimpri-Chinchwad region has emerged as the most desired destination, closely followed by areas like Ranjangaon, Jejuri, Shirwal, Khed and Kurkumb.
Residential real estate – what oversupply?
Though various reports and news articles indicate that Pune’s residential market is over-supplied and that reduced sales velocity and absorption is becoming a challenge, the ground reality is very different. Any residential project launched with maximum price tags of Rs. 1.5 Cr over the last 30 months has very limited shelf life. In Pune, the demand for apartments priced between Rs. 50 lakh to Rs. 1.5 Cr is extremely robust.
That said, the supply trends indicate that some developers in the city have been a bit over- aggressive with creating supply of apartments in the price range of Rs. 2-10 Cr. While the demand for such large ticket-size units is building up, supply currently exceeds the demand on the market. The absorption of such pricey luxury homes in Pune depends on variables such as the product proposition, location, occupant profile, amenities and linked incentives to buy.
Pune East And West – collateral growth
In terms of geographical mapping of its important residential corridors, Pune can be classified into East and West Pune. East Pune can be further classified into two sub-segments:
- Magarpatta-Hadapsar Belt: The commercial office supply in this segment has no stock to spare for leasing, indicating a very bullish trend. The demand for residential spaces in this specific micro-market is tremendous
- Nagar Road-Viman Nagar-Kalyani Nagar-Kharadi-Yerwada Belt: This belt is once again defined by extremely robust demand for commercial office space, underscoring the bullishness for residential developments there. Specific pockets in this belt have very notable developments that are great buys for homebuyers and very attractive investment propositions over the medium to long term.
The West Pune residential corridor is fundamentally defined by the Baner-Balewadi-Wakad-Hinjewadi-Sus belt. Venue of the maximum action over the past 12 months, this belt is driven by large international snapping up huge spaces for setting up offices and expanding their existing facilities.
West Pune will see considerable growth in the coming months, with the residential supply mix including an interesting share of townships and gated communities, which are rapidly becoming destinations in and by themselves.
Traditional Pune – going places
There is now a visible mutation of the demand profile of Pune’s traditional prime locations such as Model Colony, Prabhat Road, Bhandarkar Road, Saharkar Nagar and Mukund Nagar. With lack of large land parcels these elite residential strongholds, the new developments coming up in these areas are largely standalone buildings with limited common amenities.
While most of these areas are witnessing new launches of projects with unit prices upward of Rs. 3-4 Cr, the clientele for luxury homes in Pune is now becoming increasingly selective about lifestyle quotient beyond heavyweight pin codes. Buyers on the market for luxury offerings that were earlier restricted to such locations are now seriously considering the options in the Eastern and Western belts of Pune. The demand for units in standalone buildings is correspondingly seeing a declining demand trend.
The luxe factor
The trend indicators for Pune’s real estate sector are increasingly positive. Already one of the best five Indian cities for employment generation and potential, Pune is rapidly ramping up on social infrastructure, and its social fabric is now distinctly cosmopolitan. In the years to come, Pune will compete directly with cities like Bangalore, Chennai, Hyderabad and Gurgaon when it comes to attracting prominent corporates.
The resultant amplification of its employment funnel will super-charge the growth of Pune’s residential real estate market. While this will definitely erode the city’s reigning real estate USP – namely relative affordability – there is little doubt that Pune will continue to be an extraordinarily attractive investment market over the next decade.
