Pune, 5th October 2022: If the quarterly housing reports recently released by leading real estate consultancies tell us anything, it is that the Pune property market has once again proven its remarkable resilience. According to data from a research-driven consultancy, Pune recorded annual sales growth of 45% and quarterly growth of 13%. According to another company, Pune and Mumbai contributed 53% of the country’s overall residential sales in the third quarter of 2022.
This performance is very remarkable as Pune has by no means been exempt from the major challenges that the Indian property market has faced over the past three months. Inflation and fluctuating stock markets have affected Pune as much as other cities. Many of the city’s biggest builders have raised their selling prices due to the higher costs they are currently incurring. To top it off, the cost to homebuyers has increased further due to tighter interest rates.
How was Pune able to achieve such remarkable growth in such a challenging environment? To begin with, developers in the city have reduced their supply so that the number of unsold houses can naturally reduce. Demand for housing in the city has remained extremely strong, so the supply of unsold has been reduced, which is always good for the overall future prospects of a market. Moreover, while we are also seeing investors stepping up in Pune, most home buyers in Pune are buying properties for personal use.
What reading can we draw from these observations for home sales during the end-of-year celebrations? Will rising prices and interest rates lower the demand for housing in Pune? There is an answer to this question, but first of all, it is important to understand a few facts about the Pune property market.
Market Fundamentals
1. When a market sees most sales going to end users, demand is based on need, not speculation. In short, people do not buy houses in Pune to make a profit but to secure good properties for their family. When end users are the primary buyer segment, housing prices cannot skyrocket. This can only happen when investors are equal or superior to end users.
After the Covid-19 pandemic, the number of genuine buyers increased by more than 40% in the important parts of Pune Municipal Corporation (PMC) and Pimpri-Chinchwad Municipal Corporation (PCMC).
2. Pune’s employment base is constantly expanding, and more jobs equals more demand for housing. According to the Monster Employment Index released in March 2022, the demand for hiring in the country has increased by 15% compared to the previous year. This is partly because of the proactive measures announced in the 2022-23 budget, but also because India is one of the few economies that is still doing fairly well despite the pressures of the Russian-Ukrainian war.
While the IT sector is currently experiencing harsh weather conditions, major job portals are posting tens of thousands of jobs in Pune across IT/ITeS, Manufacturing, Hospitality, Sales retail and various business support processes. Pune is not only dependent on Infotech industry but is also mainly driven by manufacturing and service sectors.
This is also why housing demand in Pune is not limited to areas around its IT parks – it also extends to locations around the MIDC manufacturing belt, its various office hubs and major points of sale.
3. Currently, housing prices in Pune are still largely affordable and mortgage interest rates are also not exorbitant despite recent increases. Affordability is an important criterion, but so is the value perception factor. The fact that prices are starting to rise again after remaining almost flat for several years is a great incentive for buyers to act now rather than wait any longer.
Holiday Season Predictions
Considering all factors – continued sales momentum despite gradual price growth and rising interest rates, as well as promotions and discounts currently being offered by major property builders in Pune, the 2022 festive season will be very active for the city’s housing market.
Even though the prices of building materials have increased astronomically, the developer fraternity of Pune will ensure that their prices remain competitive during the festive season. There is every reason to expect another big house buying surge of at least 30-35% in Pune in this festive season.
Although sales momentum may decline slightly thereafter, the city will retain most of its momentum as housing demand here is not seasonal but driven by real needs.
Despite all the recent upheavals, such as the pandemic and the Russian-Ukrainian war-induced inflation, Pune has remained a hotbed of home buying activity. When we say a market has strong fundamentals, we are referring to a) how it has behaved in the past and b) what its economic drivers are. The current and future strength of Pune as a residential market is unquestionable on both fronts.
