The residential real estate segment gained significant momentum in the second half of 2021. In a bid to meet the supply deficit in Pune’s residential realty market triggered by stalling of projects due to COVID-19 pandemic, developers together launched an unprecedented number of fresh units in the second half of 2021, suggests Gera Pune Residential Realty Report.
With some 61,151 new homes being added to the market in the last 6 months, 2021 saw a 48.5 percent surge in launch of new residential units as compared to the 6 months ended 2020.
Rohit Gera, Managing Director, Gera Developments, said, “Prices have continued their upward trend increasing by 5 percent along with increasing sales and new supply. Higher sizes continue to do well highlighting not only the increased demand for bigger homes but also the commensurate increase in affordability. Affordability continues to increase and is now at 3.56 times annual salary. However, going forward we could see oversupply in certain segments create challenges which market forces will eventually correct as we have seen in the past. This risk of oversupply creating a downward pressure on selling prices combined with the massive upward cost pressure on account of material prices will continue & pose challenges for developers.”
Highlights of the report, encompassing trends from June to December 2021:
New launches surge 61% in second half of 2021
Evaluating a six-monthly trend, there has been an increase of 61 percent in new units launched in the 6 months ended December 2021 as compared to December 2020. In fact, as compared to the past six months, i.e since July 2021, the fresh supply has gone up by 130 percent.
Back in 2015, premium plus and luxury segments that accounted for merely 11 percent share in new launches now accounts for 23 percent or nearly one-fourth of all fresh supply launched. In sharp contrast, the budget and value segment which accounted for 71 percent of the fresh supply of homes in 2015 has now dropped to 48 percent.
Inventory for Sale declines further
The total ongoing projects have dramatically dropped to 2,595 in December 2021, from a peak of 3,733 in June 2017. The report suggests an increase in the average number of units per project to 120 units, up from 91 in December 2012. This means the overall project size has gone up 24 percent. However, the percentage of inventory available for sale from the total ongoing units under construction is down to 23 percent -- which is at the lowest level in the past decade.
158 percent surge in new luxury segment project launches
The luxury segment clocked a massive 158 percent growth in the fresh supply launched during the past one year whereas the Premium plus segment saw an increase of 132 percent in terms of new launches. These are strong indicators of a customer base that has moved up the value chain on a consistent basis.
This also reiterates the premiumization of real estate properties that is happening over the past three years. Comparing the share of projects launched in the Premium plus & Luxury segment in 2019 to 2021, the share of new projects launched in this segment has improved from 14% in 2019 to 23 percent in 2021.
Noteworthily, the share of three-bedroom configuration in new launches which has continued its surge, and now accounts for 17 percent of all new units launched in 2021 against 5.5 percent of the total share three years ago.
Sales firm up 12% against 2019
In the second half of 2021, the recovery in sales was significantly better. This is clear with the sales figures of 2021 being 117 percent of the levels in 2020 – clearly highlighting that the second wave recovery has been far more better than the first wave recovery indicating waning impact on real estate sales of subsequent waves.
Increased shift towards larger projects
At the time of introduction of RERA, there were 112 large projects being developed (those with more than 500 units). This however, has gone up by 50 percent to some 169 large projects over the past five years.
In December 2021, the 169 projects constituted 6.51 percent out of the total of 2595 projects being developed, against 3 percent some three years ago. Looking at the total inventory distributed across small projects over the same period, there were 94,682 units distributed across small projects (those with under 100 units). This number has dropped to 50,512 units in Dec 2021 – indicating a shift towards larger projects in the market. The trend remains similar since June last year.
Larger projects require greater amounts of capital as well as capability and therefore are developed by larger developers. This again reiterates the continuation of the structural trend of consolidation and shaking out of the smaller developers from the market.
Prices up 5%; affordability improves, too
The overall average prices have increased by 5 percent across Pune over a 12-month period since January 2021, as compared to 2019. There is a rise in prices across the board especially in the new phases of existing projects where prices have gone up by 6.5 percent in the last 12 months.
The affordability is the highest in the last decade at 3.56x annual income making this the best time to buy a home. Over time interest rates and prices (from Jun 2015) have trended down, while incomes have risen thereby increasing the affordability significantly.
