Tuesday, February 06, 2007

Pune punch

Economic times again on Pune

This is boom town with a vengeance: if more housing is not brought into the Pune market quickly, the city could face a huge shortage. And this is not at some distant date: the Promoters and Builders Association of Poona (PBAP), an industry body comprising the city's top builders and developers, estimates this could happen over the next few months.

"Demand is fast out-stripping supply. Pune is becoming a city of have nots be it roads, housing or any other infrastructure. There is no housing stock in the market," Lalit Kumar Jain, chairman, Kumar Builders and current president, PBAP, said. He added that this is mainly due to non-availability of developable land.

Rohit Gera, executive director, Gera Developments and honorary secretary, PBAP, echoed Mr Jain's view: a galloping demand and a huge shortfall. "Pune is the sixth most important city in the country and IT is getting it huge attention. But the city cannot cope with the growth, it does not have adequate housing or infrastructure," Mr Jain remarked. He added that office premises for IT development are available in both the IT `hotspots' of the city, namely Hinjewadi and Kharadi.

When demand outstrips supply, the inevitable happens prices rise. And in Pune, prices in some locations have risen 100-150% over the past three years, averaging out at 75% for the city as a whole. The localities where appreciation has been at 150% are Kalyani Nagar, Boat Club Road and Koregaon Park. Currently, the minimum price for residential properties across the city is Rs 2,000 per sq ft, going all the way up to Rs. 8,000 per sq ft. Mr Gera pointed to the micro markets of Kharadi and Baner, where gross supply is being consumed in two-three months. And new projects are not being announced at the same rate as demand growth all of which means an upward pressure on prices of what is available.

"If no new projects are launched, then everything that is available in the market will be sold out in the next two-three months. This tight supply situation is causing the upward pressure on prices," he said.

In 2005-06, 65,000 tenements were built, which came down to between 35000 to 40,000 in the current fiscal. Developers, trying to pressure the civic body, claim that if the city's development plan is not sanctioned, there could be a further fall in construction in fiscal 2007-08. Just when the city is getting more investment, hence more jobs being created.

As for the much-touted townships, market sources claim that all the 15 to 16 of them are stuck with the state government's environment department, awaiting clearances. Since each of these project is being developed on a 100 acre area, these sources point to the marginal effect they will have on the city's woefully inadequate supply.

"Townships don't solve the problem since they will each have a maximum of 4,000 tenements if the FSI is 1. If the FSI is not increased to 1, then the maximum tenements each will have is 2,000. Every year, 1 lakh people get added to the city's population where is the housing for them?" they asked.

Developers in the city are up in arms against the civic body not passing the new Development Plan, thereby stalling the process of creating more housing. Their other grouse is the state government dragging its feet over the repeal of the Urban Land Ceiling Act (ULCA), under which large chunks of land are not available.

According to one estimate, if the ULCA is repealed, then an additional 15,000 acres could come into the market in the Pune and Pimpri Chinchwad areas. Apart from land becoming available, it will also have a cooling effect on prices, helping to stabilise the market, developers maintained. Mr Jain pointed out that with an annual influx of 1 lakh people, 60% of who will need housing, which means 65,000 tenements. Added to this is the local demand for 85,000 tenements, and the total goes to a huge 1.45 lakh incremental homes every year. "About 60% of people who come to Pune, who will need housing also includes the lower income group (LIG) component. These people will live in shanties and they do not get counted," he said.

Although this is not a phenomenon specific to Pune alone and is part of the urban Indian nightmare, it is an area which does not receive the requisite action. "The LIG segment is not addressed and it is unacceptable for society or our social structure that they should live in shanties. We, as developers, need support from the central and state governments since there is no funding available for the construction of such housing," Mr Jain said. With close to 40% of the city's population living in slums, this is a significant segment.

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