Office Space Absorption Drives Pune Residential Realty
One of the key drivers of residential real estate market in any city, besides good infrastructure and connectivity, is the absorption of office space. A healthy absorption of office space indicates that there are more business, retail and commercial establishments coming up in the area which in turn will drive the residential real estate market. Pune is currently facing this phase of healthy absorption of office space.
Pune’s office absorption picks up
Most cities faced a decline in office space absorption by 20-40% in the year 2013 due to the slowdown of the country’s economy. However, Bangalore and Pune saw an increase in incremental absorption of office space. Pune witnessed a 15% increase in office space absorption last year. The city also saw an increase in investment funds in office assets, especially in Kharadi and Hinjewadi. Of all the cities that saw an increase in office space absorption including Bangalore, Delhi-NCR and Mumbai, Pune saw the highest quarter-on-quarter increase of 26% during the last quarter of 2013.
The absorption over the entire year in Pune was about 3.5 million sq.ft. Most of these were Grade A spaces that found favour from occupiers due to quality developments.
Absorption drives residential real estate
Pune is emerging as one of the most sought after real estate markets in India. One important reason is the rise of IT and commercial establishments in the city that have led to improvement in infrastructure and employment opportunities and, hence, demand for housing. Most IT and commercial establishments in the city are concentrated in Hinjewadi, Hadapsar and Kharadi. As such, these establishments have attracted more middle to upper-middle income group in these areas.
In 2013, nearly 50% of apartment launches in Pune were in the mid-segment range of Rs. 40-80 lakhs. Also, most of these apartment launches were in areas of Hinjewadi, Hadapsar, Wakad, Thathawade, Ravat and Karadi due to their proximity to IT/ITeS establishments. Consequently, capital values too have gone up in these localities. For example, property prices in Hadapsar was approximately Rs. 4,500 per sq. ft. in 2012 and approximately, Rs. 5,150 per sq. ft. in 2013. Similarly, capital value in Hinjewadi in 2012 was approximately Rs. 4,400 per sq. ft. whereas it was Rs. 5,000 per sq. ft. in 2013.
Over the last two years, Pune has been continuously performing well in terms of residential real estate. The primary segment opting for residential space comprise of people working in the IT/ITeS, automobile and manufacturing sectors. With improvement in office space absorption, especially by these sectors, the residential real estate market is expected to grow further in Pune.
