Friday, February 09, 2007

Pune still climbing

Times of India

If you thought Pune’s property prices have reached a plateau, think again, says Prachi Bari

Incredible as it might seem, in last one year, property prices in some areas rose 60-100%. Even middle level properties in Magarpatta, which were earlier quoting at Rs 2,400, are now quoted at Rs 3500. High-end properties quoting at Rs 3,000 a year and a half ago are now quoting Rs 4,500. The city is also witnessing a new phenomenon with one-off properties in areas like Boat Club and Koregaon Park going at Rs 10,000 a sq. ft. So does that mean that prices have now reached a peak and are not likely to rise further? Not quite, say the experts.
Four factors – they say will continue to contribute to the rising real estate prices, especially in the Eastern and Western corridors of the city. First is the paucity of land and consequent rise in land prices, the second is a rise in construction costs, third is the rise in the developers’ cost of funds and fourth is the continued flow of migration thanks to increased employment opportunities.
Satish Magar, MD, Magarpatta city Development Corporation feels that although the market is looking good, there is a shortfall of land to develop. “Land is going to be a major problem and will add to the increase of the price of real estate in Pune.”
Rajesh Choudhary, MD Prestige Developers concurs with this view. “Land cost as well as building material cost have gone up and are adding to the rising prices of real estate,” he says.
Choudhary also points out that led by the IT and ITES industry, migration to Pune is only likely to gather steam. This will create fresh supply, he believes. “Thanks to more companies setting up base in the city, Pune is becoming the destination where in a lakh of job opportunities will be created on an annual basis. These jobs will translate in an increased demand for housing, as well as a greater demand for retail, entertainment and hospitality spaces. Given this demand a price correction is unlikely in the short
term,” he says.
Aditi Watve, Senior executive, Capital markets and investment Sales, Trammell Crowe Meghraj agrees with the viewpoint saying, “There is definitely lot of migration happening to the city which amounts in tremendous amount of job creation, especially in IT, Manufacturing and services,” she says. Watve adds that as long as genuine buyers and retail investors fuel the market, prices will continue to rise but it will not be steep.
Analysts point out that it is not just the increased demand but its quality has also undergone a change. With rising salaries, buyers are willing to pay for more and more amenities. Hardly any developer is today constructing a project with 1BHK flats since the demand is for a minimum of 2BHK flats, going up to premium 4BHK and 5BHK row houses and bungalows, with fancy fitting and high-tech amenities. This itself creates a price pressure. This is especially true of the Eastern and Western Corridors of the city, they say.
As a result market players say, prices in fact may rise higher. Rohit Gera MD, Gera Developers says, “If one were to look at the price rise of the new projects, there will be a good 10 to 15 per cent increase in the price rate. I don’t think the prices will come down as there is also an heavy increase in the construction cost.”
Jones Lang Lasalle also rules out any correction at least for the next six to 12 months. Zaheer Bandukwalla, Associate Director of the international property consulting firm says, “As of now there is no correction as the projects supposed to enter the market have not come up. There may be a slight slump in the market in 2008-09, with more supply entering the market, both in IT and residential.”
According to Mufadal, proprietor Realtors and Secretary of Pune Real Estate Agents Association, “The location of the project, its stage of completion determines the extent to which prices would rise. Demand for projects nearing completion is higher with actual users while investors are looking at pre launch projects in areas like Kharadi, Baner, Kalyani Nagar, and Viman Nagar.”
Shrikant Paranjape, MD Paranjape Schemes believes that a correction is likely first in Metros like Delhi and Mumbai, before it happens in Pune. But he believes that perhaps the rate rise in prices may be lower. “I don’t see any correction in the reduction of rates in cities like Pune, although the way the rates were galloping, 2007 will see them trotting,” he says.
According to Paranjape, Pune prices are still affordable — even at the rate of Rs. 3500 per sq. ft. But he believes that once the rates start going beyond Rs. 4000 per sq ft, then there will be a resistance.
So what this really means that if you were planning to postpone your decision to buy a home, hoping that there will be a correction in prices in the near future; think again. You could actually end up paying more, not less, a year down the line.

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