Residential sales in Pune rise by 9% YoY in H2 2020; West Pune records 63% sales growth in Q4

Pune, January 6, 2021: Knight Frank India today launched the 14th edition of its flagship half-yearly report – India Real Estate: H2 2020 – which presents a comprehensive analysis of the residential and office market performance across eight major cities for the July-December 2020 (H2 2020) period. The report showed that while gross office leasing in Pune recorded at 1.7 mn sq ft during H2 2020, new office completions were at 0.5 mn sq ft during the same period. In Q3 2020 office transactions dropped to 10% of 2019 quarterly average due to restrictions on office workforce capacity. The office transactions witnessed a rapid recovery in Q4 2020; the transactions jumped 919% QoQ to 1.5 mn sq ft over 0.15 mn sq ft recorded in Q3 2020 and reached 99% of 2019 quarterly average.

Co-working operators have become bullish about their business prospects and have been actively taking up spaces. In terms of the sectorial occupier share, Co-working dominates with a 42% YoY share in H2 2020, followed by other services with 25% YoY, Manufacturing with 16% YoY respectively. During H2 2020, only two micro-market, PBD East (Kharadi, Phursungi, Wanowrie) and SBD East (Kalyani Nagar, Yerwada, Nagar Road, Hadapsar) witnessed exponential transaction growth of 375% YoY to 0.86 mn sq ft and 50% YoY to 0.62 mn sq ft in H2 2020 respectively.

The report highlights that homes sales in Pune witnessed a significant growth of 54% YoY to 11,952 units in Q4 2020 after the reduction in stamp duty rates, which helped H2 2020 sales reach 16,870 units growing 9% YoY. As construction labour started returning towards end of August 2020, the launch momentum also improved and   21,557 units were launched during the second half of the year (H2 2020). In Q3 2020, sales and launches situation improved and reached 60% of the 2019 quarterly average.

The reduction in stamp duty rates announced by the Maharashtra Government effective for a period of 7 months from September 2020 had the desired impact and invigorated homebuyer sentiments in Pune. Sales in Q4 2020 grew by 54% YoY and reached 146% of 2019 quarterly average. 51% of home sold in Pune during H2 2020 were in the above INR 5 million (INR 50 lakh) ticket size segment against 39% in H2 2019 due to new demand for upgrading to larger apartments created during the lockdown. Developers have started catering to this new demand for larger homes and at the city level, the average size of apartments in new launches has increased from 71.8 sq m (773 sq ft) to 73.2 sq m (788 sq ft) in 2020.

OFFICE MARKET HIGHLIGHTS OF PUNE

Source: Knight Frank Research

•  The city’s office leasing activity was down by 30% YoY to 0.16 mn sq m (1.7 mn sq ft) in H2 2020, and new office completion was down by 80% to 0.05 mn sq m (0.5 mn sq ft) during the period.
• The shortage of construction labour impacted office completions for most parts of 2020.
• As the transaction activity started improving in Q4 2020, the transactions jumped 919% QoQ over Q3 2020 and reached 99% of 2019 quarterly average led by demand from the co-working segments.
• Co-working became the largest occupier segment during H2 2020 and their share of transactions has grown from 31% during H2 2019 to 42% during H2 2020.
• Co-working operators are bullish about their business prospects and have been actively taking up spaces in the second half of 2020. The operators believe that once these limits of utilisation of office space are lifted, companies would look to avoid spending money on office capex given the business uncertainties and look at flexible office spaces with renewed vigour, as it can be scaled up or scaled down as required.
• In 2020, the weighted average rent at the city level declined by 5.4% YoY. The rents have corrected between 3%-7% YoY across business districts in Pune during 2020. SBD East micro-market was the lowest hit with -3% YoY whereas, PBD West rental value declined by -7% YoY in 2020.
• During H2 2020, the city witnessed 32 deals with an aggregated average deal size of 4,918 sq m (52,937 sq ft).
• In terms of micro-market, while PBD East (Kharadi, Phursungi, Wanowrie) witnessed exponential office transaction growth of 375% YoY to 0.86 mn sqft, SBD West (Wakdewadi, Aundh, Baner, Kothrud, Balewadi) was hit hard by -91% YoY to 0.14 mn sq ft in H2 2020.

Paramvir Singh Paul, Branch Director-Pune, Knight Frank India said, “After a strong start to the year, the office transactions took a severe hit in Pune due to the lockdown. Occupiers were forced to keep their employees on WFH mode as offices were not allowed to run at full capacity and went slow on expansion plans. However, things recovered in the last quarter and the leasing came back to normal pre-COVID levels led by demand from co-working segment reaching 99% of 2019 quarterly average. The overall demand from IT sector in H2 was low on account of the limitations office workforce capacity which have been in place for over 9 months. Other cities with lower restrictions office utilisation compared to Pune have witnessed demand recover faster. We believe a similar trend to play out in Pune as well and the demand for office spaces would recuperate once these restrictions are lifted.”

RESIDENTIAL MARKET HIGHLIGHTS OF PUNE

Source: Knight Frank Research

• Despite all the lockdown woes, home sales in Pune witnessed a 9% YoY rise to 16,870 units in H2 2020. In half-yearly terms, launches of new homes registered to 21,557 units in H2 2020.
• Due to the reduction in stamp duty rates, home sales in Q4 2020 jumped by a whopping 54% YoY and reached 146% of 2019 quarterly average.
• 51% of home sold in Pune during H2 2020 were in the above INR 5 million (INR 50 lakh) ticket size segment against 39% in H2 2019 due to new demand for upgrading to larger apartments created during the lockdown.
• In Q4 2020, markets in West Pune (Aundh, Baner, Wakad, Hinjewadi, Bavdhan, Pashan) recorded the highest growth in sales at 63% YoY to 4,065 units, followed by East at 58% to3,352 units , North at 47% to 2,172 units, with South and Central Pune recording a growth of 40% YoY each.
• Home launches in Q4 2020 grew by 23% YoY to 14,836 units and 121% QoQ compared to 4,918 units in Q3 2020.
• As more homebuyers are now looking to purchase larger apartments, developers have tried to reconfigure their new launches by adding room within the same layout or increasing apartments’ size. 27% of the new launches during H2 2020 were above INR 5 million ticket size compared to 14% during H2 2019.
• Further, the average size of apartments in new launches increased across all micro-markets of Pune except one at the city level, the average size of apartments in new launches has increased from 71.8 sq m (773 sq ft) to 73.2 sq m (788 sq ft) in 2020.
• The weighted average prices of the city were down 5.2% YoY during H2 2020. While these are the reduction in quoted prices, the actual discounts offered during negotiations was higher.

Paramvir Singh Paul, Branch Director-Pune, Knight Frank India said, “The Pune residential market has witnessed higher growth in sales in sales in Q4 compared to other top cities in India. Factors such as demand for an upgrade, increased savings due to lockdown, a festive period of Navratri-Dussehra-Diwali and reduction in home loan rates to historic lows have dovetailed well with the stamp duty cut, invigorating the real estate demand in Pune. Many developers continued to offer indirect discounts and used their digital prowess to market the projects which has helped keep buyers engaged in the market. In H2 2020, we witnessed a revival of demand in the under-construction segments as well. Several homebuyers who looking to purchase an apartment in the near future have opted for apartments in under-construction projects to make most of the lower stamp duty window. We believe that the sales momentum is likely to continue till the lower stamp duty regime.”