Undri- The next Property Destination of Pune

Undri has always been a logical residential property destination in Pune, but for many years it lacked the required infrastructure. However, as NIBM Road became increasingly saturated, Undri started to come into focus. The revival of demand from the city's manufacturing and IT sectors helped to encourage developers to concentrate more on this area. Locations like Undri are ideal for offering residential options to these segments and at the same de-congesting the main city. The area, which is also temptingly close to Pune Camp, is now developing rapidly, and it is becoming a hotspot for residential property investment.

Undri has the advantage of being well connected to various key localities in Pune via various local and interstate highways and expressways while retaining its serenity. It has dense green cover protected by Government regulations. Proximity to Wanowrie and NIBM gives ensures that residents in Undri have access to all necessities of daily living. It is an ideal residential real estate location, and one of the few in the more central part of Pune which still offer the city's laid-back natural charm at affordable rates.

Home buyers as well as investors are very enthusiastic about this location, which offers cost-effective housing options to employees from the close-by IT/ITeS companies. with the widening of the The Katraj-Kondhwa-Phursungi-Solapur highway, Undri's all-round connectivity is going to increase dramatically. Moreover, it will soon be completely included within the Pune Municipal Limits, which will boost infrastructure development even further.

REFORM ISSUE IN REAL ESTATE SECTOR

The Indian real estate market is still in its infancy, largely unorganized and dominated by a large number of small players, with very few corporate or large players having national presence. The Indian real estate market, as compared to the other more developed Asian and Western markets, is characterized by smaller size, lower availability of good quality space and higher prices.
However, the concept of real estate has recorded a major increase in the recent past due to the increase in the population and also due to the fact that majority of the people have started settling in the urban areas due to their employment opportunities and hence the need for these structures has increased abundantly. The consequent increase in the business opportunities and the migration of labour has increased the demand for commercial and housing space especially the rental housing development in the real estate sector is being influenced by the development in the retail, hospitality and entertainment (i.e., the development of hotels, resorts, cinema houses) industries, the economic services and the IT enabled services.
It is the major employment driver being the second largest employer next only to agriculture. This is due to the reason that the other industries like steel, cement, brick, timber and building material are linked to this sector. It is difficult to estimate the exact contribution of the real estate sector to the gross domestic product. The gross value added in the ownership of dwellings is equivalent to the gross rental of the residence dwelling less the cost of repairs and maintenance.
The Indian market is still in its infancy, unorganized and dominated by a large number of small players with a few corporate or large players having national presence. The Indian real estate market as compared to the other developed Asian countries is characterized by a smaller size, lower availability of good quality space and higher prices. The State- owned Development bodies and the Housing Boards leaving very little space for the others largely control the urban land.
The restrictive legislations and the lack of transparency in the transactions are the other main impediments to the growth of this sector. Limited investments from the organized sectors has also hindered in the growth of this sector. There do exist large amount of undeclared transactions mainly due to the high stamp duty rates and also stringent legislative Acts.
In order to enhance reform in Real Estate Sector the following points are to be taken into consideration:
1. Infrastructure Status to Housing: This will enable easier access to the low cost institutional funds and also allow the sector to tap long term funds.
2. Real Estate Mutual Funds: The government should consider setting up the Real Estate Mutual Fund/Investment Trusts to provide the much needed support to the cash starved housing sector. The Real Estate Mutual Fund/Investment Trusts would be an efficient mode for providing equity financing as against debt, which is currently the norm for financing real estate development in India.
3. Stamp Duty: In some states the stamp duty is as high as 14–15% of the value of a transaction. Astonishingly, in Indian context not only the stamp duty is high but the levy of duty is done at every subsequent stage of transaction, be it the initial transfer/purchase of the land or on further sale of the same land after development or any other succeeding transaction. Though the rate is stepped down to 6–8%, it will be ideal to get it down to 2–3% and make it uniform throughout the country.
If the above is not practically possible, then stamp duty is to be mechanized whereby a provision for concession or a system of credit for any subsequent transaction should be made which would avoid the cascading effect of stamp duty and reduce the cost of the property. This concept is already in existence in the other statutes viz., CENVAT, VAT, etc.
4. Public private partnership: There is a need to evolve a regulatory framework that encourages participation of the private sector in bringing technical and managerial expertise to formulate and deliver basic amenities like water, sanitation, transport and electricity.
5. Amendment of Laws: There is need for amendment of the laws involved in this sector to encourage growth.
6. Environmental Impact Assessment Notifications: The notification specifies that no construction activity can be taken up despite the approval of plans by the competent authority, till the environmental clearance has been sought. In cases where the approval of plans has already been granted the construction activities are allowed, though in the intervening period the builder/ developer should obtain the clearance.
Further in cases of proposed projects the environmental clearance in city development projects should be obtained by the states themselves or by the planning bodies and not by the individual to save time.
7. Taxation: Over a period of time the tax and the regulatory environment in the real estate sector have become very important. The construction industry is already subject to a number of taxes and is considered one of the most overburdened tax segments. The corporate involved in this segment is of the general opinion that there should not be further imposition of levy in any form in this particular sector. Any further tax burden on this sector would affect the growth and the development of the sector as a whole.
a) Service Tax: The service tax in relation to construction of residential house complexes having more than 12 houses has been imposed. However, no rationale has been provided for the exclusion of services in relation to construction of residential bungalow that may not be part of a ‘residential complex’.
There seems to be no plausible rationale for taxing a residential complex and not construction of a bungalow that may entail a higher cost of construction in many cases. Further, no rationale has been provided for the threshold of 12 dwelling units in a residential complex. The service tax should not be levied, because the sector is paying a number of taxes.
b) Value Added Tax: VAT has been introduced in 20 states. For the successful implementation of VAT it is important that there should be uniformity in the rates, rules and regulations throughout the states. Not only do the rules vary but also the regulations. There is an urgent need to abolish CST as VST and CST cannot go hand in hand. It is important that local levies be completely abolished from all states.
c) Free Trade Agreement (FTA): The government may consider signing up of more FTAs with other countries in the interest of the real estate segment. However, while doing so, the interest of the domestic players should be borne in mind.
d) Form C: Uniformity regarding the permission to issue a Form-C for the purpose of purchasing goods to be used in the work contracts. The State Government should abide by the Central Laws regulating the issuance of Form-C.
e) CST: According to the norms of CST, sale includes work contracts. Hence, any goods moving from one state to another for the purpose of usage in execution works contracts now fall under the ambit of inter state works contract and the state from where the goods are moved is liable to impose the tax.
f) Excise Duty on Immovable Property: The excise duty should not be levied in the case of immovable property like in the case of installation of lifts to encourage this sector.

Real Estate in Pune city- A feel good factor...

Pune real estate has been the most consistent markets across the country and the future seems very good because of lots of growth drivers and prevailing good economic conditions. Here are few factors responsible for this.

1. Since 2007-2008, the city has witnessed the launch of more than 200,000 units of which more than 150,000 units have been absorbed till Q3 2012, resulting in 23% remaining unsold; the reason behind the same is the rate of absorption is not able to match the pace new launches.
2. Construction activity concentrated more on eastern and western Pune, about 33%and 28% of the under construction units are located in West and East Pune respectively.
3. Strong growth of IT/ ITes and Auto & Auto Ancillary sector (17%) is one of the driving factors for Pune’s real estate growth and will continue to be for coming 5 years.
4. Currently the IT/ITeS sector accounts for 74% of total office space and this percentage is going to go up with new IT/ITes offices becoming operational in the coming years.
5. Office space in Pune witnessed growth from 20.4mn sq.ft. in 2007 to 64.7mn sq.ft; however the absorption has been slowing down leading to gradual increase in vacancy level. Presently the vacancy level stands at 26% as on Q3 2012.
6. Majority, almost 95% of overall office development in Pune is focused on eastern and western Pune.
7. In western Pune, the residential prices are bound to rise in majority of destinations with some destinations outperforming others. Destinations closer to Hinjewadi IT Park and along Pune-Mumbai By-pass will witness higher appreciation as compared to farther locations.
8. Hinjewadi, Wakad, Tathavadeand Ravet are expected to witness maximum price appreciation in Pune residential market; primary reasons being
i) 80% of office space located in western Pune concentrated in Hinjewadi; it increases importance of residential market in proximity.
ii) West Pune has become a self-sufficient zone, reducing dependence on Pune City.
iii) Due to present state social and physical infrastructure in the region, proximity to workplace has gained paramount importance for home buyers
Hinjewadi:
1. Since 2007, total of 15,000 units launched in Hinjewadi of which more than 11,000 units have been sold resulting to 76% absorption till date.
2. Prices in Hinjewadi will move up to Rs. 8000/sq.ft from average level of Rs. 4000/ sq.ft.; appreciation of about 100%.
3. Besides reasons mentioned above, growing preference of walk-to-office concept has made Hinjewadi most sought after destination among IT professionals.
Wakad:
1. Since 2007, total of 15,570 units are launched of which 12,864 units have been sold accounting to 82% absorption till date.
2. The prices in Wakad are expected to touch Rs. 8,600 / sq.ft mark in 2017 from present average level of Rs. 4,500 / sq.ft.; a 91% appreciation.
3. A drop in new launches in 2012 in region will help to decrease the unsold units from previous years.
Tathawade
1. 4 km from Hinjewadi, physical characteristics similar to Wakad but prices 5% less than that of Wakad.
2. Since 2010, a total of 1,400 units launched of which more than 1,000 units are absorbed; absorption 73%.
3. The prices in Tathawade are expected to touch Rs. 8,500 / sq.ft mark in 2017 from present average level of Rs. 4,300 / sq.ft; a 98% appreciation.
Ravet:
1. 9 km from Hinjewadi, relatively a new location
2. Since 2010, a total of 1,750 units launched of which 1,200 units are absorbed; absorption 70%.
3. Prices in Ravet will move up to Rs.7, 800/sq.ft from average level of Rs. 3,950/ sq.ft; appreciation of about 98%.

These are the excerpts from the recent reports from the a leading research agency..

Pune Property Ready reckoner rates zoom northwards

The Maharashtra state’s RR rate for Koregaon Park is Rs 10,212 per sq ft for a house or flat — the highest in the city. Though the current market rate is much higher, the RR rate has recorded an increase of Rs 1,712 over last year’s rate. Areas such as Koregaon Park, Shivajinagar and Kalyaninagar attracted maximum ready reckoner rates for housing, other areas that closely follow are Shivajinagar (Rs 9,520) and Kalyaninagar (Rs 8,550), where high-valued deals of residential properties were registered in the 2012 calendar year. The earlier rates in Shivajinagar and Kalyaninagar were Rs 7,930 per sq ft and Rs 7,125 per sq ft respectively.
    “RR rates are revised based on the number of deals and their value reported at the property registration office and information gathered by the officials about real estate. It gives the department an idea about the current trend in the real estate market,” said S Chockalingam, Inspector General of Registration (IGR) and Controller of Stamps of the state.
    The IGR office has increased RR rates in most areas in the Pune Municipal Corporation (PMC) limits by about 20%. However, the steepest rise in the rates is in the Pimpri Chinchwad Municipal Corporation limits, as more and more residential projects are coming up in those areas.
    A senior officer from the IGR office said that in the PMC limits, most under-construction residential complexes fall under the redevelopment category — where projects are coming up on plots where residential property previously existed. Very few vacant plots are being developed. As a result, the rates in these areas, which are driving development, are higher than the fringe areas, the officer said.
    The RR rates in Bibvewadi, Kothrud, Sadashiv Peth, Baner, Gultekadi and Dhankawadi have gone up by Rs 1,000 per sq ft as these areas are witnessing high-valued transactions compared to areas such as Narayan Peth, Hadapsar, Mundhwa, Warje and Wanowrie.
    Property rates in Pimple Nilakh, Bhosari and Pimple Gurav are so high that the government has increased the RR rates by 35% to 70% for the current year. The state government wants RR rates to be close to the market rates, which would generate more revenue in the form of stamp duty. Stamp duty is charged on the amount quoted in the deal documents. At present, stamp duty is 5% for urban areas and 4% for rural areas.
    Ready reckoner rates are government approved rates used during valuation of property, legal disputes over real estate and compensation after acquisition.
    The IGR office has increased ready reckoner rates every year for the last two decades. The general tendency of customer is to show lower than the actual amount on paper while buying a flat or property. As stamp duty is charged only on the quoted amount, the government loses revenue and black money is generated. To curb such practices, the government regularly gathers data of ongoing rates of properties in various areas across the state and updates the ready reckoner rate. It is mandatory for buyers and sellers to get the deal registered with the government and file stamp duty accordingly. If a buyer shows an amount lower than ready reckoner rates, he/she has to pay stamp duty as per the ready reckoner rates. The exercise is to reduce the gap with market rates to maximise government revenue. 

Pune Luxury Real Estate on Rise

After a lull of over a year, the luxury segment of the city's real estate market has shown signs of a comeback. Realty sector experts say that there has been a steady increase in luxury projects across cities in India and Pune is a big contributor to this movement.

"Bangalore is at the top of the chart as more than 50% of total luxury units launched in 2012 are there, while Pune has a contribution of nearly 8%," Shveta Jain, executive director of realty advisory company Cushman & Wakefield India, told TOI.

"Residential luxury market in India has exhibited a bullish behavior despite a slowdown in the real estate market of India during the last couple of years. The growing demand in the segment is mainly due to the increase in the number of high net worth individuals (HNIs),'' she said.

Ashutosh Limaye, head of real estate investor services at realty research and advisory company Jones Lang Le Salle (JLL), said despite global economic and financial crisis, the Indian residential market has been relatively stable. "Luxury homes is a growing preference of new age buyers and that has encouraged developers to launch luxury or super luxury housing projects priced between Rs 1 crore and Rs 20 crore.''

The data available with Cushman & Wakefield indicate that there has been a steady increase in luxury projects across the major cities in India.

While cities such as Hyderabad, Bangalore and Pune have witnessed an upward trend in the total number of luxury housing units launched, cities like Mumbai, Kolkata, and the NCR have witnessed a decrease in the total luxury units launched in 2012 in comparison to 2011. In Bangalore, Mumbai and Hyderabad, the luxury segment contributed 7%, 5% and 5% respectively of the total housing supply in 2012, while in Pune it contributed nearly 1%.

Locations such as Goregaon East in Mumbai, Gurgaon in the NCR, Hebbal in Bangalore, and western Hyderabad witnessed the highest capital appreciation at 44%, 42%, 21% and 13% respectively in 2012, the firm said.

The enthusiasm of developers is visible as Pune and surroundings witnessed the launch of three high-end homes projects in less than a month's time, with each unit carrying a price tag of Rs 1 crore upward, going up to Rs 7 crore. Pune witnessed launch of three luxury projects in 2012 in comparison to two projects last year. While the number of total units launched in 2012 increased by nearly 170% over those launched in 2011, the number of luxury units launched in 2012 increased by more than 250%, Cushman & Wakefield pointed out. The average launch price of luxury projects launched in 2012 increased by nearly 20%, compared to 2011.

Sanjay Bajaj, managing director for Pune at JLL, said: "Despite the cautious economic climate, there is still a lot of wealth generation happening among India's HNIs. The luxury homes segment is not a huge contributor to the overall real estate demand in the country, but it has a definite - though limited - clientele and developers who are catering to it. Pune has a relatively good demand ratio for luxury housing in the country; thanks to better amenities and less exotic land prices.

Rishabh Siroya, director of a realty firm, told TOI that seekers of luxury homes are showing renewed interest, though there was never a slump as far as this segment was concerned. "It's perhaps a coincidence that developers did not launch any ambitious high-end homes project in the last one year or so, but there was no question of demand for these properties at any time. Recession never hits luxury. If one wants to buy a Rolls Royce car, he buys it - good markets or bad,'' Siroya said, adding, "The key to luxury housing is that the buyer must be convinced about the features he's getting. Once that happens, price is no hindrance."

Abhisheck Lodha, managing director of a Mumbai based realty company, offered a different paradigm for luxury. "Luxury is a state of mind. Strangely, however, luxury has been connected with the price of homes. It is important how a person feels living in the house he occupies and the comfort he draws from its surroundings," Lodha said. Lodha added that the market for high-price homes was niche one and thus small. "This segment is about 4% of the country's residential market, led by select cities such as Mumbai, Pune, Bangalore, Chandigarh and Delhi NCR. It is, however, growing steadily on the back of rising aspirations and higher disposable incomes.

Luxury housing in India is here to stay, but will probably never cross the 5-6% of the overall real estate demand, Bajaj said. "The rich-poor divide is still too big. While buyers of luxury housing are less affected by economic fluctuations than the middle-class, it cannot be said that performance of the economy does not drive the sentiments in this segment."

Update on Real Estate Bill

The central government has clarified that there is no definite time-frame for approval and implementation of the 'Real Estate (Regulation & Development) Bill, 2012.

The bill was prepared to promote planned and healthy real estate development of colonies and apartments with a view to protect consumer interest and to facilitate smooth and speedy urban construction.

"In order to provide a uniform regulatory environment to enforce disclosure, fair practice and accountability norms and fast track dispute resolution mechanism in real estate transactions, the ministry of housing and urban poverty alleviation has drafted the 'Real Estate (Regulation and Development) Bill, 2012 in consultation with all stakeholders... Since necessary approvals for introducing the bill in Parliament have not been received, no time-frame can be assigned for its finalization at this juncture," states a press statement issued by the government.

The bill aims to establish a regulatory authority and an appellate tribunal to regulate, control and promote planned and healthy development and construction, sale, transfer and management of colonies, residential buildings and apartments.

As of now the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 enables the state government to monitor timely completion of real estate projects. The draft cabinet note on the new bill has been circulated to all state governments for comments. A meeting with the state ministers dealing with the subject was also held recently.

"The state government has given its feed back to the central government regarding this bill and The state government

has held rounds of meetings with the municipal corporation office-bearers in the state. Considering the opposition from the real estate market, the bill is likely to get delayed," said a state government official.

Real estate housing may get Industry status.....

Housing may get industry or infrastructure statusTNN | Dec 13, 2012, 02.40AM IST
PUNE: The state government has 'in principle' supported the recommendation by a technical group to make housing a part of infrastructure or declare it as an industry.

The 'technical group on estimation of urban housing shortage' of the country for the 12th Five Year Plan period (2012-17) has recently submitted its final report to the ministry of housing and urban poverty alleviation.

"The state government in principle has supported the suggestion. The final decision will soon conveyed to the central governmentIf housing becomes part of infrastructure or treated as industry, it will change the dynamics of urban development," said a state government official.

If housing becomes an industry, the rules and regulations would change; and if it is put under the infrastructure category, more central and state funds could flow to civic bodies.

According to the technical group, the total housing shortage estimated at the beginning of the 12th Five-Year Plan period is 18.78 million. Out of that, 10.55 million is in the economically weaker section (EWS) category and 7.41 million is in the low income group (LIG) category.

In Pune, the mid-city area, comprising 17 'peths' and surrounding areas, spanning over 147.85 sq km, is facing a shortage of 658,975 houses. To accommodate the burgeoning population, the municipal corporation will have to facilitate construction of over 30,000 affordable houses in the coming years. Failure to do so will result in rise of slums.

The new Development Plan (DP) for the old city areas has highlighted the need for affordable housing in the heart of the city.

According to the housing survey incorporated in the DP, in the 17 'peths' and six sectors that the city has been divided into, the requirement of the EWS is around 290,873 houses (that is 44.14% of the total housing requirements). The low income group requires 132,022 houses (20.03%), middle income group requires 172,977 houses (26.24%) and the higher income group needs 63,103 houses (9.58%).