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Property prices in Pune drop 4%, launches down 19% in June: Report

Gera Pune Residential Realty report said that there was a downward trend in property prices because the majority of new launches were in the small size segment that were priced lower

Pune, the first smart city to raise municipal bonds worth Rs 200 crore after a gap of almost 14 years, is also gaining maturity as a real estate market. With demonetisation, RERA and Goods and Services Tax (GST) transforming the real estate landscape, Pune's property prices dropped by 4 percent and launches too, came down by almost 19 percent in June, ensuring that excess unsold inventory is soaked up.

Average residential property prices continued to decrease at an overall level bringing the drop in property prices to 4.01 percent year-on-year in June 2017,  says Gera Pune Residential Realty Report for January-June 2017.

As part of the study, nearly 3,700 projects across the Pune Metropolitan Development Authority (PMRDA) Region were surveyed over the last two years.

The report said that there was a downward trend in property prices because the majority of new launches were in the small size segment that were priced lower. The current average price across the region was Rs 4,786 per sq ft.

Most of the decline has come in the past 6 months, and can be attributed to the twin effects of demonetisation and RERA. The average residential property prices decreased at an overall level from Rs 4, 900 per sq ft in December 2016 to Rs 4,786 per sq ft. in June 2017 — a price drop of 2.33% — bringing the total drop in property prices since June 2016 to 4.01%.

The decline in prices is more pronounced in new launches — new phases of existing projects were launched at an average price of  Rs 4,510 per sq ft in the first half of 2017 compared to Rs 4,774 per sq ft in the second half of 2015, which is a drop of 5.5%, the report highlighted.

Affordability Increases by 30%

With the average prices declining on account of new inventory being launched at lower prices, in real terms, the affordability has in fact increased, says the report.

Here's how the math works

RE_exhibits_new_21072017

 

Experts say that if the average increase in salary was around 6%, the same home buyer can now afford nearly 30% more than they could afford in the second half of 2013. Besides, there is increased traction in ready properties as RERA is not applicable under this segment.

"This indicates that average prices are declining on the whole. This is also on account of new inventory coming in at lower prices, bringing the average price down rather than a correction in existing projects. In real terms, the affordability has in fact increased. There is also talk of home purchases shifting to ready properties. But the inventory available for sale of ready homes is very low. There are only 8,849 ready homes available for sale, while 86,354 units were sold in the last 12 months. Clearly if demand shifts to ready homes, demand will far outstrip supply leading to a price rise. Second, since developers will incur GST costs and if they cannot afford to bear these costs, they may pass this additional cost on as a price rise" says Rohit Gera, Managing Director, Gera Developments.

New launches

The last 12 months have seen a reduction of 19.7% in the total number of units launched.

On a year-on-year comparison, 81,922 new homes were launched in the last 12 months (July 16 to June 17) down from 1,02,036 homes launched in the previous 12 month period (July 15 to June 16), a reduction of 19.7% in the total number of units launched, says the report.

The last six months have seen a drop of over 26% in the new homes segment launched for sale. This is down from 47,119 units launched in the period between July and December 2016 to 34,803 units launched in January to June 2017.

The premium plus or luxury saw the biggest decline of  40% decrease in the number of new units launched in the last six months as compared to the previous period. This is followed by a 37% drop in new units launched in the premium segment.

"Our expectation is that new unit launches will drop further in the July-December period of 2017," says Gera.

Sales momentum

There has been a reduction of 16.01 per cent in the off take in the first half or  2017 as compared H1 2016. Sales momentum has moved into the budget and value segments.

The drop in sales is consistent across all sizes. While the total sales have dropped, the market share of the sub-600 sq ft category has increased with approximately one-fourth sales now emanating from the sub-600 sq ft segment. Looking at the actual sales volume it confirms the fact that sales momentum has moved into the budget and value segments. The category of houses under 800 sq ft accounted for half of the overall market offtake in Pune.

With new launches coming down though, the average size of the unsold inventory has steadily reduced from 105 million sq ft in June 14 to 94 million sq ft in June 17.

The gross value of the inventory for sale stands at Rs. 49,214 crore on June 17 as against the gross value of Rs. 53,181 crore as on December 2016, a reduction of 7.46%. This is on account of the reduction in overall inventory for sale and prices over the same period.
first published: Jul 21, 2017 06:03 pm