Thursday, November 12, 2009

Commercial, residential realty picks up momentum in city

The price of real estate in the city, which was on a low for most of last year, has stabilised and in fact posted a bit of a rise in select
locations, if recent research by real estate advisory firms are any indication.

Importantly, commercial real estate including retail spaces which took a bigger hit in the wake of the economic slowdown, is also showing an upward trend as demonstrated by the plans of some major world bands to enter the city, the reports said.

The trend is in keeping with developments witnessed nationally. The realty scene in major cities in the country has seen higher levels of activity after the early signs of an economic recovery both in India and internationally, said the quarterly report of realty research and advisory firm Cushman & Wakefield (C&W).

The report for the third quarter of the year (July-September) observed that the market was characterised by a positive sentiment and increased activity was witnessed. "The city witnessed the launch of various residential projects in the third quarter across many micro markets in both mid- and high-end segments. Capital and rental values appreciated across the city in the third quarter," the report observed. However, values are still below their all-time highs by about 10-30 per cent in Pune, the report said.

Aditi Vijayakar, executive director of residential services at C&W said, "The price and the buyer's sentiment are critical in the current market as key parameters influencing sales. Capital values in select locations in Pune are likely to see growth in the coming months. However, if prices increase too much too soon, there is a likelihood of them correcting again shortly after; the ideal graph representing recovery should be gradual and in line with the demand that calls for a period of considerable stabilisation before the hike."

According to Vijaykar, the Pune residential market has started to regain momentum in the past quarter with all locations witnessing marginal increase in rental and capital values by September 2009. Demand has started to move upward largely driven by end users. Pune is highly price sensitive and the current upward trend is largely a result of the correction in values that was witnessed in the last few quarters which have made the values more affordable. Also noticeable is that the large part of the transactions are happening in the newly-launched projects which offer more competitive values.

According to the C&W report, high end areas such as Koregaon park or Bund Garden have shown an 8 per cent rise in prices while elsewhere the rise is 2-6 per cent.

Satish Magar, President of Credai Pune (Confederation of Real Estate Developers' Associations of India) and chairman and managing director of Magarpatta city Development Corporation, told TOI that the rise in residential prices is not very remarkable and in most cases it restricted to Rs 100 per sq ft. Commercial segment on the other hand, has been active again as enquiries from IT firms have gone up.

"IT firms are back in expansion mode and have started hiring, which has triggered the activity in this segment," Magar said, adding that the retail segment too is warming up again as consumer confidence returns and a new kind of leasee-lessor relationship evolves. "From a flat rental agreement, we are now on a fixed plus floating rental basis where a leasee pays a minimum guaranteed rental and shares revenues with the developer. This has reduced the initial burden on the retailers easing their liquidity problems."

"From a near flat level till June this year, we have leased over 4 lakh sq ft space in Magarpatta City till now," Magar said.

Anand Dutta, head (retail) Pune for real estate consultancy Jones Lang LaSalle Meghraj, said retail transactions have picked up noticeably, following a marked upsurge in shopper sentiments and a generalised correction in retail real estate rentals. "An increasing number of retail landlords in Pune's malls and on key high street locations have opened up to the minimum guarantee and revenue-sharing models. The general stance now is that if a retailer is making money, landlords are willing to offer reductions on rentals if the retailer is willing to share his topline.

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