There is also a seismic event in the offing that will have an effect and drive prices upward. The recently passed Maharashtra Housing Act provides for all projects to hold back 10% of their built up area to be sold only after the occupancy certificate is obtained for the project. While this move is certainly in the interest of the customer and the project in the long run, the short run will see a price spike on account of this action.
Of the total stock of 2,03,186 flats for sale in Pune, 43,354 residential flats are in the projects that are ready. This leaves a total of 1,59,832 residential new flats in Pune that are under construction at various stages. These projects have a total unsold stock of 37,941 new flats in Pune. Of this, 10% of the total stock i.e. 15,983 new flats in Pune will need to be put on reserve and cannot be sold until the occupancy certificate is obtained for these projects. This will create an artificial shortage and reduce the available stock by 42% leaving a total of 21,958 new flats for sale in Pune available for sale. The total flats for sale in Pune will therefore be 27,322. This is only 13.44% of the total supply. We believe this will create an upward pressure on prices. This price pressure will be greater in micro markets with the highest sellout ratios as many micro markets will see virtual stock outs. Clearly these markets have the highest demand. Artificially removing the supply from the market ought to push up prices.
The question of the customers’ ability to afford residential flats in Pune at the increased prices still remains the key question. How much can prices rise without affecting the customer’s ability or desire to purchase?
MARKET SUPPLY/AVAILABILITY BREAK UP OF SUPPLY BY SIZE OF APARTMENTS
Analysis of the unsold stock by sizes of the apartments shows the maximum numbers of unsold apartments are in the size segment of 751 sf to 1000 sf. A total of 13,510 apartments are unsold in this segment. The sum total of the unsold apartments under 1000 sf is 24,004 apartments out of a total unsold stock of 43,305 apartments – 55% of the unsold apartments are sized 1000 psf or under. This also suggests that the market is evenly split on either side of the 1000 sf mark.
The increase is distributed reasonably evenly across the various sizes of apartments except for the segment above 2000 sf. Here while the absolute numbers are down, the base is also down. A look at figure 3 tells the story of this segment. The average prices for all bedroom sizes are up while the 4 bedroom segment in the luxurious flats in Pune has seen a decline over the last 6 months. There seems to be fewer customers to buy luxurious flats in Pune and developers having realized this have reduced the supply in this segment.
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