Construction Industry News
Gera Developments, creators of residential and commercial projects in Pune, Goa and Bengaluru, recently released the January 2023 edition of their biennial report entitled 'The Gera Pune Residential Realty Report'. It is based on primary and in-house research conducted by Gera Developments and includes all existing projects within a 30 km radius of the city centre. The report is the result of the longest-running census-based study of Pune's residential real estate market.
According to the latest Gera Pune Residential Realty Report for the period June 2022 to December 2022, all parameters look very strong at first glance. House prices at an average rate of Rs 5,461 per square meter are less than 8% higher than the previous peak of Rs 5,096 in December 2015. The salary increases during this period have more than offset the rise in interest rates. House prices increased by 10.85% in 2022. The average rates have increased from Rs 4,926 per square meter in Dec '21 to Rs 5,461 per square meter in December '22. Fresh landings launched in the past six months remain at a high level, but compared to the six-month period ending Dec '21, fresh landings have decreased by 22% and compared to the six-month period ending June '22, it has decreased by 13%, indicating that new launches are happening at a healthy level, but not at the breakneck pace of the past.
The total stock for sale is healthy with 72,129 homes, i.e. 23.21% of the total stock under development, i.e. 310,725 homes. This gross inventory number has been fairly stable since December 2015. The replacement ratio is also stable at 0.95. The stock overhang is at an all-time low of 8.37.
Rohit Gera, MD, Gera Developments, said: “The property market in Pune has had a good 2022 – this is in line with other property markets across the country. Rising interest rates have not had much detrimental effect on the overall market; while some sales may have been impacted, the salary increase over this period more than offset the increase in interest rates. However, the future is more uncertain due to macroeconomic and global factors. We are seeing increasing global headwinds and layoffs affecting employment in the IT sector. We believe that a bigger issue besides affordability (which is not a cause for concern at this point) is job security.”
“Regardless of affordability, job insecurity can cause people to delay their decision to make a major purchase, such as a home. While India seems relatively less affected so far and we're touted as a beacon of hope for the rest of the world, layoffs in the tech sector and a corresponding erosion of sentiment would impact home sales.
“The introduction of the unified development control rules has resulted in a significant increase in development potential in the jurisdictions of Pune Municipal Corporation and Pimpri Chinchwad Municipal Corporation. One of the results of this is the increased size of projects.”
He further added: “The major impact of this increased development potential will become apparent once the unified DC rules become applicable in the PMRDA region. The PMRDA has the largest area under its jurisdiction. These areas have less development and rates are generally lower. Higher densities lead to higher construction costs, as densification actually leads to higher buildings, extra parking spaces on stages, etc.”
He also underlined the increase in construction costs for developers, saying: “Increased densification will therefore lead to higher construction costs and possibly increased supply. So far, supply has paralleled demand, which is why the market remains vibrant. At first glance, things look very good. Time will tell what, be it job security or oversupply, is dragging the market down.”
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