The Hindu Business Line : Pune bucks the trend

Leading builders and developers in the city dismiss suggestions that the prices of apartments are heading for a sharp drop, maintaining that the demand is steady, and still outstrips supply.

— M. Karunakaran

Supply still short of demand.

Alka Kshirsagar

At the end of May, the Magarpatta Township Development and Construction Company announced a spanking new housing project on Sinhagad Road, an area that, till not so long ago, was referred to as ‘city outskirts’.

A month on, the first phase of 5,800 apartments, of 20,000 planned, is fully sold out. Ditto the case with other several other projects, including the Blue Ridge Township at Hinjewadi from Paranjape Schemes that has seen robust sales in the last few months.

Even as industry experts across the country are forecasting an imminent steep decline in the capital values of residential properties, Pune seems to be defying the trend. Leading builders and developers in the city dismiss suggestions that the prices of apartments are heading for a sharp drop, maintaining that the demand is steady, and still outstrips supply.

Not hot, for speculators

“Yes, there was a drop in volumes of sales around March 2007,” concedes Mr Lalit Kumar Jain, Chairman and Managing Director, Kumar Builders, and President, Promoters and Builders Association of Pune (PBAP).

“People waited, thinking that prices were going to drop. Now that they have not, but are, in fact, rising, demand has picked up again and sales are better than last year,” he says, adding, “Pune was never as hot as, say, Gurgaon or Bangalore from the speculation point of view. So we haven’t seen a major drop in prices either.”

According to Mr Jain, Pune is not an investors’ paradise. With the IT and engineering industry still the major demand driversaround 70 per cent of clients are first time buyers, 25 per cent are buying their second home, and only the rest rent it out or buy it as an investment.

Predictably, Kalyani Nagar and Baner, the areas nearest to the two major IT hubs in the city, have seen the fastest growth in number of homes as well as price escalation in recent times. The newest developing housing area is Chakan, the emerging auto hub.

Mr Satish Magar, Managing Director, Magarpatta, asks “How can prices move down when both land cost and cost of construction that accounts for 60 per cent of the final price are phenomenally up over the three last three years?”

As per a rough estimate, on an average, 35,000-40,000 new apartments, over 80 per cent of which cater to the middle-income group, are currently constructed per annum.

Though this is up from the 20,000-25,000 that were being built till three-five years ago, Dr D K Abhyankar, Director General, PBAP, believes that the supply continues to be around 20 per cent short of demand.

“In addition to industry, the student population, including nearly 10,000 from overseas, continue to fuel demand for housing, and I don’t see any recession on this front in the city for at least the next 10 years,” he says.

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