Why 1BHK flats won't grow in Pimpri-Chinchwad

The twin towns of Pimpri-Chinchwad are witnessing kaleidoscopic demand for residential units. According research reports and views expressed by realtors, there is scope for developing affordable housing aka 1BHK flats. However, to buyers' dismay there are not too many options available at present nor there are chances of any opportunity presenting itself in the future. Blame it on higher profit margins that dealers and builders make on residential units bigger than 1BHK flats.

MARKET COMPOSITION

The Primpri-Chinchwad real estate market comprises buyers (who want to live in the houses) and investors (who seek only rental income). It has a population of 18 lakh, according to Census 2011, which is rising due to migrant workers being hired by IT and auto hubs in the vicinity. This has ensured rising income levels and as a result the demand for 1BHK set up by young or single people has been rising at 15 percent per annum, according rough industry estimates.

In Pimpri-Chinchwad, much alike across India, private developers primarily target luxury, high-end and upper-mid housing segment since it fetches a premium over low-income housing. This increases competitiveness for developers. As a consequence, housing for poor and EWS (economically weaker section) is primarily provided by government welfare programmes but falls spectacularly short to meet the demand.

DEMAND-SUPPLY GAP

There are several reasons for this expanding gulf between demand and supply of 1BHK flats or affordable residential units. Kishor Pate, CMD of Amit Enterprises Housing Ltd, a leading developer believes this trend exists because "a large part of the Pimpri-Chinchwad market is investor-driven, who always display a lot of interest in emerging and developing areas because of lower property rates and promise of appreciation."

He added, "Pimpri Chinchwad Municipal Corporation's (PCMC) developed infrastructure of the twin-cities and property appreciation has been steady and assured in most prominent areas. In such a scenario, affordable houses are usually the first to fall into short supply because they are the fastest movers on the market. There is a huge demand for 1-1.5 BHK flats in such areas, not only because of their affordability but also because of high resale value and assured rental income of these flats."

The demand is there. Kishor Firodiya, Partner, Samruddhi Associate informed that 40 percent inquiries come for the 1BHK segment. "Working professionals in the age group of 24 to 32 seek for affordable 1BHK flats as it fits their pay grade. A 1BHK on an average costs around Rs 25 to Rs 27 lakh. Banks easily provide loans up to Rs 20 lakh. The current rates are in range of Rs 4,000 per sq ft in Pimpri-Chinchwad," he explained.

Firodiya informs that residential realty patterns in the region were pretty much polarised between the 1BHK and 2BHK segments patronized by the working and the officer class respectively. "Since the working class category was huge, the 1BHK was affordable. But in the current scenario, several job options have opened up and salary packages are of various ranges. Hence seven to eight years back there was rise in demand for 2BHK flats but the slowdown in 2009 again affected the growth. The demand for 1BHK flat plunged in the last two-and-a-half years," said Firodiya.

Jones Lang LaSalle, a real estate consultancy, in a report on Affordable Housing in India stated, "Development of large-scale affordable housing is the greatest necessity of urban India today. Lack in low-income housing has resulted in the proliferation of slums and unorganized real estate. It is both detrimental to the planned growth of cities and is also restrictive to slum dwellers who are deprived of basic civic amenities."

The report added, "Large-scale urban development is becoming difficult due to lack of land parcels, congested transit routes, lack of finance, rising input costs and regulatory hurdles. However, it is vital that these issues be addressed urgently so that a comprehensive framework can be established in ensuring the development of affordable housing."

The report further advocates the need to formulate guidelines for identifying right beneficiaries for affordable housing projects, which would help in ensuring the reach to right beneficiaries and avoid involvement of speculative investors.

It also suggested creation of the National Population Register and issuance of unique identity through Unique Identification Authority of India. This will become a crucial step in this regard, if it is linked with income levels. Self help groups (SHGs) and other innovative financing mechanisms would ensure that housing finance is available to large sections of LIG and EWS populations. Flexible payment mechanisms should be put into place, as households in low-income groups typically have variable income flows.

PROPERTY APPRECIATION

According to Sanjay Bajaj, managing director - Pune, Jones Lang LaSalle India, the frantic development in the PCMC realty sector, is a response to the demand. "There is now a constant demand for budget homes, both by end users and investors seeking rental income. The escalating demand has caused property rates of the region to match that of Pune. This has not boded well for budget home buyers, whose options in the region are decreasing every quarter."

Rajendra Jain, proprietor of Runal Developers said, "Customers need to either shift their focus or move little ahead of the prime locality to purchase affordable homes, or increase purchasing value. With recent inception of 17 villages in the twin town, the cost of land in those areas are low. So there is scope for development for the 1BHK segment demand."

He added, since the 17 villages were at the verge of development, rates are low. But in areas like Wakad, Pimple Saudagar, close to the IT Park the rates are peaking. "For affordable homes the focus must shift from prime area to other under development locality," he said.

Source: articles.economictimes.indiatimes.com