Pune Real Estate Sees 11.03% Increase in Residential Rates in 12 Months

Pune, 9th July 2023: Gera Developments, renowned pioneers in the real estate industry and creators of prestigious residential and commercial projects in Pune, Goa, and Bengaluru, have unveiled their bi-annual report, titled ‘The Gera Pune Residential Realty Report’ for June 2023. The report, based on extensive research conducted by Gera Developments, provides insights into the residential real estate market within a 30 km radius of Pune’s city center. Covering 151 micromarkets, this comprehensive report presents key findings and trends in the Pune housing market.

According to the latest edition of ‘The Gera Pune Residential Realty Report,’ covering the period from January 2023 to June 2023, the market has transitioned from a phase of rapid growth in sales and new project launches to a more sustainable level. Over the past 12 months, property prices have increased by 11% across all projects. While new project launches and sales have decreased, the replacement ratio remains healthy at 0.98, indicating slightly higher sales compared to new inventory additions. The total number of homes under development in the Pune region has reduced by 5%, from 315,088 to 297,801 units, accounting for 23.36% of the overall available inventory.

Mr. Rohit Gera, Managing Director of Gera Developments, commented on the findings of the June 2023 edition of ‘The Gera Residential Realty Report’ and the current trends in Pune’s residential real estate market. He stated, “The Pune real estate market is currently experiencing both a boom and a period of consolidation simultaneously. Prices have risen by 11.03% from ₹5,208 per sq. ft. in June 2022 to ₹5,782 per sq. ft. in June 2023. This increase is evident across new projects, existing phases of older projects, as well as new phases of ongoing projects. It reflects strong demand, as homebuyers are willing to purchase properties at higher prices than ever before. However, the overall sales volume for the past 12 months has decreased by 8%, from 105,625 units in the period of June 2021 to June 2022, to 97,214 units in the period of June 2022 to June 2023. This decline can be attributed to the rising home prices and increased interest rates. Such price increases and a corresponding decline in demand are typical indicators of a bullish market.”

Mr. Gera added, “During a period of market boom, we usually witness a surge in the number of project launches. However, currently, we are experiencing a 10-year low in terms of the number of projects and overall inventory. Over the past year (June 2022 to June 2023), only 93,734 new homes were added to the total inventory, indicating a decrease of nearly 19.19% compared to the previous year’s new inventory of 115,996 homes.”

He further explained, “A noticeable trend is the increase in the average size of projects, accompanied by a reduction in the number of smaller-sized projects and a greater dominance of projects by larger developers. Looking ahead, two scenarios could unfold: if developers introduce a substantial supply, we may face an oversupply situation due to the easing of sales figures from previous highs. Conversely, if the current equilibrium levels maintain constrained supply, we can expect a steady rise in prices.”

Here are the key highlights from ‘The Gera Pune Residential Reality Report,’ covering trends from January 2023 to June 2023:

In recent years, the Pune residential real estate market has faced a shortage of supply, leading developers to launch new units to meet the demand. However, during the period ending in June 2023, new supply decreased by 16%, with 46,007 units launched compared to 54,845 units launched in the previous year. This reduction suggests that new launches are gradually normalizing to match historical levels. When considering annual figures, new launches declined by approximately 19%, with 93,734 homes launched in the last 12 months compared to 115,996 units in the preceding 12-month period.

The steepest decrease in new launches occurred in the premium segment (prices between ₹5,833 per sq. ft. and ₹6,998 per sq. ft.), followed by the premium plus segment (prices between ₹6,999 per sq. ft. and ₹8,748 per sq. ft.). The luxury segment (prices above ₹8,748 per sq. ft.) experienced the lowest drop of 8% in new launches. Although the number of new launches decreased compared to the previous year, the current figure of 93,734 units is still higher than previous years. The increase in new launches during 2021-2022 was a recovery from the impact of the pandemic in 2020-2021.

Looking at fresh supply in different zones, the premium city center (Zone 5) experienced a 13% reduction in fresh supply, with 4,422 units, while PCMC (Zone 6) saw a 10% decrease. Overall, there was a decline in fresh supply across all zones.

However, key operational metrics such as the replacement ratio (0.98) and inventory overhang do not indicate any significant concerns in the near future.

The total inventory available for sale reduced by 7%, reaching 69,553 units as of June 2023 compared to June 2022. This number is significantly lower than the peak unsold inventory of 107,402 units observed in June 2016 when the unsold inventory accounted for 33% of the total homes under development. The introduction of RERA shortly after that period, along with a four-year downward trend in home prices, led to the current reasonable level of unsold inventory, accounting for 23.36% of the total homes under development.

On a six-month basis, the total inventory available for sale decreased by 0.6% and now stands at 7.66 Cr sq. ft., with the value of the inventory increasing to ₹48,393 Cr.

Sales volume declined by 8% over the past 12 months and 12% on a six-monthly basis. Sales for the previous 12 months reached 97,214 units (July 2022 to June 2023) compared to 105,625 units between July 2021 and June 2022. The main contributor to this decline is the sub 1,000 sq. ft. segment, while pockets of growth were observed in the 1,001 sq. ft. to 1,800 sq. ft. segment. In this cycle, the budget and value segments, which previously faced challenges, experienced growth rates of 2% and 5%, respectively. On the other hand, the premium, premium plus, and luxury segments witnessed declines of 37%, 14%, and 13%, respectively. Notably, the growth in luxury segment sales, which was previously substantial, has been curtailed during this period.

The market is increasingly moving towards larger projects with more than 500 units. The number of large projects increased from 115 in June 2018 to 174 in June 2023. The percentage share of these large projects in the total projects being developed also rose from 3.3% in June 2018 to 7.