Pune residential market sees a price decline for the first time in a decade- Knight Frank India

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~Co-working service providers emerge as new potential occupiers~

Pune, January10, 2018: Knight Frank India today launched the eighth edition of its flagship half yearly report – India Real Estate. It presents a comprehensive analysis of the residential and office market performance of Pune for the period July – December 2017 (H2 2017).
Residential Takeaways:
· Residential launches shrunk by 58% in H2 2017 as developers’ focus shifted towards completing existing projects. New projects down by a staggering 77% from its peak in 2012
· Decade records debut fall of 7% in average weightage price. Developers’ make the deal sweeter with collective discounts up to 12-13%
· Sales volumes in H2 2017 are down by 2% YoY but upcoming IT markets in western Pune have performed better in H2 2017 recording a 27% rise in sales
· While unsold inventory levels crashed by 43% in H2 2017 YoY;,QTS drops to less than a year

Office Takeaways:
· New office supply dwindled by almost 71% in H2 2017 courtesy developers’ focus towards incomplete residential projects
· The Pune market bounced back in terms of office leasing registered a 51% growth in H2 2017 YoY
· While vacancy levels plunged from 8.2% to 5.8%, weighted average rentals across Pune increased 5% YoY to Rs. 63/sq. ft/month in 2017
· The share of the Other Services sectors more than doubled even as the demand from the traditional market leader – IT sector tapered from 44% in H2 2016 to 36% in H2 2017

Speaking about the findings, Paramvir Singh Paul, Branch Director – Pune said, “Maharashtra was the only state thatnotified the RERA rules in a timelymanner and subsequently implementedit state-wide, despitethis there has been no meaningful positiveimpact on sales on account of renewedconfidence in the case of Pune in H2 2017.Sales weremarginally lower at 2% year-on-year(YoY) in H2 2017which could be attributed to theconsumer sentiment being dented by joblosses in the IT industry.The upcomingIT markets of western Pune haveperformed better in H2 2017 recording a27% rise in sales.Launcheson the other hand, declined by 58% in H2 2017 compared to H2 2016 as developers focussed their effortson completing on-going projects ratherthan launching new ones.For the first time in this decade(2011–2020), there was areduction in quoted prices in Pune asthe weighted averageprices reduced by 7% YoY. In additionto the reduction in base prices,developers offered discounts in the form of freebies thereby taking the effective discount to12–13%. The overallunsold inventory levels during H2 2017fell 43% YoY to 28,455 units down 60%from the peaks of H1 2014 while the QTS (Quarters To Sell) drops to less than a year.

Officespace completions, on the other hand, took a back seat in the backdrop of RERA implementation and developers’reorientation towards completion ofresidential projects.Declining by almost 71% in H2 2017,the new project completions were ameagre 0.35 mnsqft in this period.On the demand side,transaction volumes registered a 51%growth in H2 2017 compared to H22016 while the annual growth for 2017was counted at 18%.The IT industry had the largestshare of transactions in H2 2017, butthe slowdown in the IT industry dueto global headwinds was visible in thedrastic fall in share compared to theprevious year. The share of IT/ITeSreduced from 44% in H2 2016 to 36%in H2 2017.This led to an increase in the share of Manufacturingand Other Services including co-working from 14%and 10% in H2 2016 to 20% and 21%,respectively, in H2 2017.There has been a shortage of goodquality large office space supply inPune. The occupiers are increasinglyfinding it difficult to find a spacesuiting their requirements and sometransactions are being held up for thesame reason. With no major supplyexpected to come up in 2018, theeffects of this shortage would reflectsignificantly on the vacancy rates andthe rental growth in Pune in 2018.”