Gera Developments, pioneers of the real estate business and the award-winning creators of premium residential and commercial projects in Pune, Goa and Bengaluru, presented the Gera Pune Residential Realty Report for July - December 2019.
Key Highlights of the report:
Total units being built is at an all-time high
The inventory for sale has also risen after falling since June 17 indicating supply outstripping demand. The total number of units under development had reached a peak level of 327,670 units in June 17.
Since then, on account of a reduction in new project launches, the total inventory contracted for next two years and finally rebounded by approximately three per cent to 301,731 units in June 19 from 292,842 in December 18. In December 19 it grew further by approximately 12 per cent to 336,186 units surpassing the peak in June 17.
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This suggests that the market has accelerated in the last six months in terms of construction activity. From a peak inventory available for sale at 107,402 apartments in June 16 the inventory available for sale currently stands at 89,887 apartments. Inventory available for sale grew by approximately 12 per cent as well over June 19 (when it was 80,062 units). However, inventory levels down by 16 per cent from June 16 peak.
Since the implementation of RERA, the number of live projects in Pune has reduced from the peak of 3,733 projects in June 17 to 3,490 in December 19. As of December 19, the total number of projects on hold (where work has commenced and presently stopped) has reached 249 (the figure of 3,490 live projects excludes these 249 projects).
These 249 projects consist of 40,023 apartments and based on our prior data, 23,466 apartments are sold. This means approximately 24,000 families are stuck with incomplete projects at present.
New launches at a four-year high
At the city level, new launches have increased significantly by 37 per cent. This indicates optimism amongst the developer community. As highlighted above, there is an overall increase of 37 per cent in new launches (99,541 apartments launched in the 12 months ended December 19 compared to the 72,503 launched in the 12 months ended December 18).
Due to this increase, new launches have hit a four-year high (it was at 93,978 units in the 12 months ended 2016).
Demand and Supply Gaps
There has been a significant increase in new supply in the premium segment. This is possibly due to the migration of demand to higher bedroom types. Data comparing demand and supply gap across the last 2 years clearly indicates where the supply is migrating in response to shifts in demand.
In 2018, there was clearly an oversupply in the 1 BHK product segment and a clear undersupply in the 2 BHK segment. The market recognizing this mismatch launched 2 BHK inventory leading to an oversupply in 2 BHK. The 2 BHK plus segment is now seeing undersupply where demand is approximately 27 per cent and supply is approximately 15 per cent.
Supply is outstripping Demand
One way to look at the real estate cycle is through the lens of "replacement ratio". The current replacement ratio is 1.17 whereas the replacement ratio hit its peak at 1.455 in June 15. This indicates that supply is greater than demand i.e. more units are being added than being taken out.
Market in Consolidation mode - 17 projects account for 10,000 units sold
The market is clearly consolidating. In 2019, 17 projects were needed to sell 10,000 units from the total yearly offtake of 94,383 units. In 2017, 40 projects were needed to sell 10,000 units (2017 yearly offtake was 76,149 units).
We looked at 20 of the top developers in Pune in terms of brand name and repute. We then calculated what was their share in the yearly offtake of Pune. The data clearly indicates that over the past their share in sales has gotten stronger especially post RERA.
These developers have very successfully managed to take away sales from other developers. Clearly, the reason why most developers are in bad shape is because they are unable to compete effectively with these top players.
The Pune market consists of 3490 projects of which 2386 (68 per cent) projects are less than 100 units.
Overall market prices remain flat but prices rise in the core market (>= 100 units of inventory)
Overall market prices have broadly remained flat over the last 6 months after witnessing an erosion of approximately 11 per cent from peak levels seen in December 15. In June 19, average market price was Rs 4,555 Psf which has gone down to Rs 4,530 Psf (a reduction of 0.54 per cent). Average prices in the core market (projects which account for a majority of sales) have grown by 2.6 per cent since December 18.
Affordability Index shows the highest affordability compared to the past eight years
We looked at the trends in affordability over time and data indicates that affordability is at an all-time high as on December 19 at 3.71x annual income making this the best time to buy a home. Over time interest rates and prices (from June 15 onwards) have trended down, while incomes have risen thereby increasing the affordability significantly.
Sales offtake at a four-year high. Increase of 15 per cent over the last 12 months.
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Disclaimer: No Business Standard Journalist was involved in creation of this content
