Investor's Guide to Pune Real Estate

When it comes to investment in Pune real estate, smaller investors do not enjoy the same bouquet of options as their institutional counterparts. While the latter category of investors can afford to handle portfolios consisting of many properties, smaller investors are limited by the fact that lending institutions will usually not anything over and above a second home loan.

The RBI has imposed these restrictions because it is trying to curb speculation - which is the opportunistic purchase and disposal of properties (also known as 'flipping' in markets like the US). This is justifiable, since speculation has, in the past, been the main cause of driving up prices unrealistically in many cities such as Mumbai, Chennai, Bangalore, Delhi NCR and Pune is no exception to this trend.

Of course, smaller investors can still use their personal funds to invest in more than one property. Where this is possible, such investors tend to plug their funds into rent-generating properties which, depending on their choice of location and project, will potentially yield good, regular income, says Kishor Pate, CMD of Amit Enterprises Housing Ltd.

Is this is wiser option that investing limited funds in gold or the stock market? It certainly is. Investment in a well-chosen residential property in Pune is a perfect way to counter inflation. Neither gold nor real estate relinquishes their intrinsic market value. But while gold does nothing but sit in the bank locker or the home safe while it appreciates, a residential property bought for investment will earn the owner rental income even as it appreciates.

If the market dynamics in the chosen location are favourable, the rental come on the property will increase in line with the growing demand for rental properties there.

 Guidelines to real estate investment

• The first factor to be considered while purchasing an investment property in Pune is location. Pune is a diverse market, and it is possible to get confused by the multitude of options available. Depending on one's budget, one can consider luxury housing in established locations and premium or budget housing in upcoming locations. There are two main criteria for making the right decision - the property needs to be either centrally located, or located close to one of Pune's IT or non-IT commercial hubs.

• The second factor to look out for is the legal sanctity of the project. The investor must be sure that there are no litigations or documentation shortfalls involved - either on the project or on the plot on which it has been built.

• The third important factor is the right point at which to invest. Many lay investors prefer to wait indefinitely for prices to fall. However, the fact is that the demand for residential property in the most lucrative locations of Pune is only going to rise. Waiting for the 'magic price point' will invariably mean missing out on very good options which were affordable at one time and will be too expensive to invest in a year or even a few months down the line.

• The fourth factor is how long one intends to stay invested in the property. The minimum period required for avoiding capital gains tax is three years, but certain locations will require a longer time to gain sufficiently in capital value for profitable resale. An investor must know when the right time to sell the property comes around. In Pune, a well-chosen property will continue to gain in intrinsic value as well as rental income generation potential. The temptation to exit and make a tidy profit may be strong at times, but it may make more sense to defer such a decision for yet a while longer.

• The fifth factor is the professionalism and credibility of a developer on Pune's residential real estate market. Even with all the above factors attended to, the fact is that many good investment projects in Pune are still under construction. The developer should have a good record for time-bound project completion. The investor should ensure that he is not dealing with an obscure, unscrupulous and potentially under-funded developer or else the investment could turn into a nightmare situation.

Godrej Properties in JV for housing project in Gurgaon

New Delhi: Real estate firm Godrej Properties on Monday said it has entered into an agreement with Oasis Buildhome, which owns nearly 14 acre of land in Gurgaon, to develop a premium housing project.

This would be the fourth project of Godrej Properties, which is part of realty arm of Godrej Group, in the national capital region (NCR).

In a filing to the BSE, Godrej Properties informed that it has "entered into a development agreement with Oasis Buildhome Pvt Ltd to develop a 13.76 acre property situated on Northern Periphery Road (NPR) in Sector 88A/89A, Gurgaon".

The project would be developed as a premium residential group housing project and is expected to offer 1.2 million sq ft of saleable area, it added.

Godrej Properties is currently developing two residential projects in Gurgaon and has recently added a new project in Okhla in the national capital where it plans to undertake a premium housing project. As with most Godrej Properties projects, this project is being done as a joint venture.

"We are happy to add this new project in Gurgaon to our development portfolio. NCR is an important growth market for us and this is the second new project we have entered in NCR in FY14," Godrej Properties Managing Director & CEO Pirojsha Godrej said.

The project fits well with the company's strategy of growing its presence in India's leading real estate markets, he added.

Godrej Properties is currently developing residential, commercial and township projects spread across 87.6 million square feet in 12 cities.

Economic crisis and impact on realty sector

The recovery of the Indian economy has once again come under cloud with key economic indicators like Current Account Deficit (CAD) and consumer inflation remaining above the comfort level of the Reserve Bank of India (RBI).

While CAD reached a high of 6.7% of GDP in the December 2012 quarter, consumer price index grew at 10.2% in April 2013. Both these indicators are set to deteriorate further as the Indian currency has depreciated sharply against the US Dollar

(USD) in the last one quarter.

The Indian Rupee has changed from Rs 54.4/USD in April 2013 to Rs 59/USD in June 2013 resulting in an 8.5% fall. Such a fall will make imports more expensive resulting in higher CAD and consumer inflation. The worsening macroeconomic condition is expected to delay the reduction of policy rates by the RBI thereby deferring the much-needed monetary stimulus for bringing back the domestic economy’s growth on the right track.

Real estate market has a very strong linkage with the economic growth of a country and any signs of a slowdown in the domestic economy can have a cascading effect on the health of the realty market. Among the various segments of the real estate market, office, retail and hospitality are relatively more prone to the vagaries of the macroeconomic situation as compared to the residential segment.

The primary reason behind this is the stark difference between rationales behind the purchase decision of a residential property as compared to other real estate segments. While there is an economic consideration for buying retail, hospitality or office property with the primary objective of using it for carrying out business activities, purchase decision for a residential property is generally driven by a totally different set of motives.

Factors such as affordability, proximity to the employment hub, presence of physical & social infrastructure, sentimental value attached to a locality and community consideration among others can have an overbearing impact on the buyer’s decision. Since many of these factors vary from one city to another, movement in the residential market is often divergent for each city. 

Analysis of the weighted average price trend in the   top six residential markets of the country namely Mumbai, the NCR, Bengaluru, Chennai, Hyderabad and Pune can help in understanding the varying characteristics of the residential market in each of these cities. Cities like Mumbai and Chennai, which are land locked from one side by the sea, have the highest weighted average price of Rs 5,900/sq.ft. and Rs 4,500/ sq.ft., respectively.

The unique topography of these two cities has ensured restricted supply of land resulting in high prices for residential properties here. While the weighted average price in Mumbai city is much higher at Rs 14,400/sq.ft., it goes down to Rs 5,900/sq.ft. for the entire Mumbai Metropolitan Region which also includes areas such as Thane, Navi Mumbai, Mira- Bhayandar and Vasai-Virar.

Demand for the domestic IT/ITeS industry over the last five years. Strong performance by the manufacturing, BFSI, IT/ITeS and other service sectors resulted in high demand for office space across the country during the last five years. A total of 168.5 mn.sq.ft. of office space was absorbed from 2008-2012 across six major cities namely Mumbai, National Capital Region (NCR), Bengaluru, Pune, Chennai and Hyderabad. IT/ITeS sector was the primary demand driver of office space in cities like Bengaluru, Chennai, Pune and Hyderabad accounting for more than 50% of the total absorption.

 

However, demand in Mumbai and the NCR was driven by a relatively diverse set of sectors as a large number of occupiers prefer to locate their corporate offices here.

BKC Emerging as a Hub for Consulates

Bandra Kurla Complex (BKC) is one of the most amazing feats of reclamation urban renewal in the history of Indian real estate. This is not an insignificant claim for a city which itself was shaped from seven islands by the Hornby Vellard project in 1845.

With strategic location and having most modern amenities, BKC has become the most- sought after commercial and residential real estate locations in Mumbai. This extremely valuable site has gone from strength to strength ever since it was reclaimed from useless marshlands hemmed in by Bandra in the West, Kurla in the East and Santacruz in the North.

Apart from its tactical importance to Mumbai's most prominent corporates, who adopted it as an idea alternate CBD location and shaped its imposing silhouette with glittering, ultra-modern office complexes, BKC has also emerged as the most preferred destination for foreign Consulates and trade offices, says Ramesh Nair, Managing Director - West, Jones Lang LaSalle India, who further adds, “It is already home to the US Consulate, the British High Commission and the consulates of Australia and New Zealand. And the trend is spreading.”

Over the last twelve months, the consulates of Belgium, Sweden and France have also taken up spaces in Mumbai's showcase commercial/residential location. This is in line with the increasing inclination of Mumbai's embassies and consulates to shift to more convenient locations.

Currently, a number of other consulates continue to operate from residential villas on Nepean Sea Road and at Malabar Hill. These locations, though inherently high-profile on the Mumbai real estate landscape, do not offer the kinds of buildings which suit the precise needs of these establishments.

It will be interesting for serious real estate observers to track the relocation trend, which will doubtlessly cause more and more of the city's consulates to find more suitable operating bases in the future. Consulates have specific requirements for the office spaces they opt for:

High standards of fire safety and security, with at least two exits from the floor and preferably one of the fire exits providing direct access from the unit

• The premises should be at least 10 metres above the ground
• High-visibility buildings, with ease of access and robust utility provision
• The shafts within the building should be suitably secured to prevent unauthorized acces
• Key Drivers for BKC’s Increasing Popularity With Consulate
• Excellent infrastructure and regulated traffic
• Proximity to domestic and international airports and  the Western and Eastern Highways
• Proximity to high-end residential areas such as Bandra and the presence of Dhirubhai Ambani International School and The American School of Bombay
• The presence of the MCA Club and the Trident and Sofitel Hotels
• Hygienic surroundings, ample green cover and open spaces (unlike many old projects in other locations in Mumbai)

Finally, and very significantly, the newer commercial projects in BKC offer modern amenities and better car parking ratios. Commercial office projects such as TCG Financial Centre, Maker Max City and Capital are among the most sought-after destinations for consulates, given the availability of smaller unit sizes, the high standards of building maintenance, better safety and security features, high-quality finishes and energy efficient buildings.

Themed Luxury Homes Gain Ground In Pune

Developers of residential projects in Pune are increasingly challenged by buyers' rapidly evolving tastes and preferences in luxury housing. A decade ago, luxury housing in Pune was mainly about larger spaces, fancy facades and amenities which were considered modern back then. 

Today, exposure to international concepts in luxury homes has changes the very perception of what really constitutes 'luxury', says Kishor Pate, CMD - Amit Enterprises Housing Ltd. 

Indian residential developers have already tackled various themes for their luxury projects. Among them, the sports theme has been an enduring one. Areas in Pune like Balewadi and Gahunje on the Mumbai-Pune Expressway have seen their share of projects that bask in the reflected glory of the sports stadia there. However, there are limitations to this theme - not every luxury home buyer is a sports enthusiast.

For those who are not but still seek a radically different lifestyle, the country-based theme holds far more fascination. For instance, the Mediterranean theme has seen quite a bit of action in India. In the man-made hill station of Lavasa, an entire mountain range is being transformed to evoke the peaceful grandeur of Venice. HCC has been largely successful in achieving this.

Nevertheless, Lavasa's distance from Pune is not really suitable for themed home seekers professionally active within Pune. Meanwhile, the desire for themed homes in Pune continues to grow. The country-specific themed homes trend has already caught on with luxury home buyers in Mumbai, Bangalore, Hyderabad, Chennai - and Pune has not been left behind.

This is not hard to understand. Most of Pune's HNIs are inveterate international travelers. Their world view is commensurately large. It is  not possible to visit a country like Singapore or Greece without bringing indelible memories back home. This creates a yearning to live in an evironment which reflects both the architectural styles and the lifestyles witnessed in those countries.

Singapore, in particular, is a country which almost every Puneite with an appetite for world travel has seen - in many cases, on a fairly regular basis. Many of Pune's industrialists and technocrats have business interests in Singapore - a country defined by both natural and man-made beauty, orderliness and security. Their affinity for the 'Singapore life' is a ground reality for them... and yet, Pune is the city they would rather call home.

This was the fact that inspired Amit Enterprises Housing Ltd. to launch Bloomfield, the multiple award-winning Singapore-themed luxury homes projects in serene Ambegaon. This immensely successful project offers luxurious bungalows, villas and flats in a scheme which draws inspiration from Singapore’s ethnic, yet cosmopolitan lifestyle. In fact, legendary cricketer Sachin Tendulkar himself owns a luxurious bungalow at Bloomfield - but one does not need to be a legend to own a home there.

The trend for themed homes in India is bound to increase as more and more luxury home buyers look for unique points of differentiation in projects. Something in all of us is constantly reaching out to concepts and lifestyles from beyond our borders, even as we gain in appreciation for the merits of being an Indian on Indian soil. 

As a result, the demand for themed homes among NRIs hailing from Pune particularly noteworthy. After all, such projects allow them to replicate the lifestyles they have grown accustomed to abroad - back home.

NRI Property Investors Zero In On Pune

There has been a decisive resurgence of interest by NRIs in Pune property investments. The scale of rise has not spectacular, but it does indicate that NRI investor confidence is returning.

NRI property investors tend to stay away from unfamiliar, historically over-speculative cities and focus on either on their cities of origin or on those that offer assured and stable returns on investment. The fact that Pune, with over 210 software companies, has overtaken even Bangalore and 208 in terms of IT-driven demand for residential properties has stood in the city's favour, says Kishor Pate, CMD - Amit Enterprises Housing Ltd.

Naturally, NRIs prefer to invest in residential in Pune that can earn them handsome rental returns and will also appreciate for eventual resale. They are showing a lot of demand for luxury homes as well as higher mid-income residences in the price range of Rs. 65 lakh to Rs. 3.5 crore and above. There is considerable interest in under-construction residential projects nearing completion, since these are available at lower rates. NRI property investors who are focused on rental income are on the look-out for projects in areas with sustainable demand from potential tenants.

In commercial properties, NRI investors looking at the Pune real estate market look for projects by reputed developers which are fully or almost fully leased out. Their investment appetite in this segment ranges between Rs. 5-30 crore. Despite Pune's burgeoning retail sector, NRIs are largely staying away from investments in retail projects as there far too much supply on the market. This makes investing in retail properties unattractive to them.

Challenges NRI Investors Face

Apart from a generic understanding, NRIs tend to be out of touch with Pune's real estate market. Therefore, they are not attuned to what locations and typologies work best for residential property investment. There is a lot of investigation required on the ground before a residential property investment becomes viable - especially in large-ticket assets. Also, the previous route of buying a property by 'remote control' via a power of attorney has now been closed.

The NRI Modus Operandi

NRIs who are currently abroad therefore ask their relatives or close associates in Pune to co-ordinate with reputed developers and also brokerages. Most NRIs focused on Pune property will visit the city during the festive season to finalize the property and conclude the transactions.

However, it should not be assumed that NRI property buyers are entirely clueless. In fact, they are extremely discerning. The fact that they have been exposed to the transparency of real estate markets in developed nations understandably raises their expectations in term of value for money, construction quality, facilities and amenities offered, and overall transparency.

Contrary to commonly held belief, most NRI property investors looking at Pune are aware that expecting substantial short-term gains on their investments is unrealistic. They are not 'quick buck' hunters, but rather serious portfolio players.

Chennai should be redeveloped to improve quality of life

Real estate and industry experts have opined that the southern metropolis should grow vertically to produce more affordable and mass housings and to retain its sustainability in growth, infrastructure facilities should be improved multi-fold.

They were speaking at a conference organised by GIREM (Global Initiative for Restructuring Environment and Management), an industry body to help create sustainable business eco-systems and social infrastructure, in Chennai on Thursday.  The event was held to discuss about Chennai's potential issues, challenges and its solutions, and to forecast future urban needs to make the city more liveable. 

The conference has witnessed a series of deliberation by eminent speakers from the real estate fraternity and industry experts like C&W and DTZ.

“Chennai will continue to grow exponentially, as it is attracting tremendous investments in IT, automobiles and manufacturing sectors. This will create lakhs of job opportunities in the corridors. It is time for governments and private sectors to plan proactively than reactively to send a clear message to the nation and world at large that Chennai is a city for business and life balance”, said Shyam Sundar S Pani, President, GIREM.

“Our aim is to work closely with the State government and the industries in Chennai to look at planned urban development in sync with our mission, which is to be a pro-development body”, he further added.

During the course of discussion on the topic ‘Opportunities and Challenges in Chennai - Ideas for development’, M V Satish, Executive Vice President and Head Buildings & Factories, Larsen and Toubro, said, “Chennai has to grow vertically, as against horizontally, and redevelop the city with high–rise, affordable, mass housing and mixed urban development to improve the quality of life.”

V.S Sridhar, Director and City Head – Chennai, DTZ in his address said, “Proper development will happen only when private and government sectors go hand in hand, in developing power, water and other social developments.”

On investment scenario at real estate sector, Ritesh Sachdev, Executive Director, C and W, said, “With the planned improvements in the infrastructure across the city and the strong fundamentals Chennai is only bound to attract increasing investment interest from occupiers.”

Comparing Chennai to Bangalore Hariharan, Office Director - C and W said, “Bangalore has only weather as the favouring factor, while Chennai has two ports, automobile, manufacturing growth sectors in addition to IT, as well as huge integrated developments like 1400 acre township by Mahindra World City and upcoming Ascendas Township, etc. Chennai is not dependent on IT/ITES alone unlike Hyderabad or Bangalore.”

Speakers also spoke about how and why is self-sustained satellite sectors best suited to provide work life balance? They say, having IT, automobile and manufacturing industries, and being the cultural capital of south India, Chennai can be in forefront and attract investments. 

The conference was attended by, among others, representatives from office and industrial space occupiers, infrastructure developers, service providers’ property advisors and urban and building technology providers.