Residential sales in Pune decline 2% YoY in 2019: Knight Frank Report

Knight Frank India recently launched the 12^th edition of its flagship half-yearly report – India Real Estate: H2 2019  which  showed that home sales in Pune declined 10% YoY to 15,445 units in H2 2019 and by 2% YoY to 32,809 units in 2019, while home launches in Pune witnessed a 37% YoY rise to 44,660 units in 2019 and 25% YoY to 15,445 units in H2 2019. During H2 2019, 86% of new launches were in the less than Rs 50 lakh ticket size segment.

Pune has witnessed an addition of 0.24 mn sq m (2.6 mln sqft) of new office supply in H2 2019 which was spread across most business districts. However, the supply was lower by 38% YoY during H2 2019. For the calendar year 2019, the supply was lower by 41% YoY. The lack of desired supply hindered the growth of transactions in Pune which were lower by 11% YoY at 2.4 mn sqft in H2 2019 and by 5% at 6.2 mn sqft in 2019.

Residential property highlights for Pune                                                                      Home launches in Pune witnessed a 37% YoY rise to 44,660 units in 2019. In half-yearly terms, launches of new homes registered a 25% YoY growth to 23,264 units in H2

• 86% of new launches in Pune during H2 2019 were in the less than INR 5 million (Rs 50 lakh) ticket size segment, while 91% of launches were in the less than INR 7.5 million (INR 75 lakh)

• Developers continued to launch compact homes to get the ticket size right. Over a 5-year period between 2014 and 2019, the average size of apartments in Pune has shrunk by 26%.

• Micro-markets in the West witnessed the highest growth in new launches in H2 2019 at 44% YoY followed by micro-markets in North at 32% YoY. These markets witnessed mega launches in the affordable housing

• The city witnessed a difficult year for residential with sales declining by 10% YoY to 15,445 units in H2 2019 and by 2% YoY to 32,809 units. The consumer sentiments were affected by the slowdown in the economy particularly in the manufacturing sectors and unseasonal rainfall affecting agriculture-related industries. The state and national elections in 2019 have also had their share of impact in deferring the purchase decision of

• Several mega affordable housing projects were launched in the West and many witnessed strong demand from buyers. As a result, sales in the West declined by a lower margin of 3% YoY in H2 2019 but grew on a yearly basis by 5% YoY in 2019.In Pune, West was the only region to register a growth in sales in

• Albeit marginally, the prices of apartments in Pune has declined in H2 2019. The weighted average prices were down 3% YoY in H2 2019. The prices have corrected by 13% from the peak of H2

• The Quarters-To-Sell (QTS) has gone up from 3.3 quarters in H2 2018 to 4.8 quarters in H2 2019 due to slower sales velocity. The sales have lagged behind launches in this

• In the residential market, the banks still command a lion’s share of home loans and hence, the ongoing Non-Banking Financial Companies (NBFCs) crisis has not had a major impact

Office market highlights for Pune                                                         The transaction activity in Pune continues to remain strong despite recording a decline of 5% YoY in 2019 and 11% YoY decline in H2 2019. The decline in 2019 comes on the back of a high base of the previous year. In 2018, the city had recorded several large pre-commitment transactions adding up to 0.02 mn sq m (2 mn sqft) compared to 0.08 mn sqm (0.8 mn sqft) of pre-commitments in

• The decline in transaction activity was also on account of lower space availability in the Pune market and the lower demand from the manufacturing sector due to economic

• In H2 2019, the Information Technology (IT) sector took up a 54% share of the total space transacted and the Other Services sector which includes e-commerce, consulting, co-working, media, etc. had the second-highest share of the space transacted during H2 2019, garnering 40% share of transactions which was much higher than 14% during H2 2018. This growth in the share of Other Services sector was driven primarily by co-working

• In H2 2019, co-working operators transacted around 0.05 mnsq m (0.5 mnsqft) of office space, which translates into 50% of the space transacted by the Other Services sector. As a proportion of the city’s total transaction volume, co-working operators constitute 20% in H2

• The manufacturing sector in India has been facing economic slowdown and the same was reflected in the office space demand from the manufacturing companies. The share of manufacturing sector in office transactions declined from 15% in H2 2018 to 4% in H2

• During H2 2019, Pune has witnessed an addition of 0.24 mnsq m (2.6 mnsqft) of new office supply which has spread across most business districts. However, the new supply was lower by 38% YoY during H2 2019 and lower by 41% YoY for the entire year of

• The business districts of PBD East and PBD West witnessed lower growth in rentals of 5% YoY and 3% YoY respectively, which is closer to the standard contractual rental escalations. For the other business districts of Pune such as CBD & off-CBD, SBD East and SBD West, the rental growth was higher at 8% YoY, 9% YoY and 7% YoY respectively. While some of these business districts were witnessing double-digit growth in the previous periods, this has tapered down in H2