Pune residential remains resilient during pandemic

November 25, 2020 / By  

The spread of the Covid-19 pandemic around the world this year has dampened real estate market activity across the Asia Pacific region. The resulting lockdowns, social distancing and closure of international borders significantly impacted all real estate sectors. Leasing and sales fell. Many occupiers exited commercial space due to unprecedented disruption in business and fragile cash flow situation.

That said, the Indian residential market remained healthy and the residential sector of Pune bounced back within a quarter, and started witnessing a rise from Q3 2020. Many factors contributed to the resilient performance of this sector in the pandemic.

Figure 1: Residential Resilience Drivers

Source: JLL Research, 3Q20

Reduction in home loan interest rate

The Reserve Bank of India (RBI) – The Central Bank of India directed all scheduled commercial banks (except regional rural banks), local area banks and small finance banks to link interest rates of all retail loans, including home loans, to an external benchmark – the repo rate, with effect from October 1, 2019. RBI has brought down repo rates significantly from 6.25% in February 2019 to 4% currently. As a result, the banks offering home loans transmitted this benefit to homebuyers. Some scheduled banks are currently offering interest rates as low as 6.95% as compared to 8.6% the previous year. This is increasing affordability for homebuyers during the pandemic.

Figure 2: SBI Home Loan Interest Rate

Source: SBI Website, Old Interest Rates, Last 10 years

Reduction in stamp duty

To support buyers during these challenging times, the Maharashtra government has reduced stamp duty to 200-300 bps between October 2020 and March 2021. Furthermore, NAREDCO, a self-regulatory body representing ~1,000 developers, has announced zero stamp duty for all houses purchased between September and October 2020. The government intervention, coupled with NAREDCO’s announcement, is providing the required impetus to sales activities. In turn, we are likely to observe a reduction in developers’ stock burden, especially in the state’s big cities like Mumbai, Pune, Nagpur, and Nashik, where residential developers hold a major chunk of unsold units.

As per JLL REIS 3Q20 data, total unsold stock in the high-end residential markets of the top seven Indian cities stood at 4.5-lakh units; of which Mumbai and Pune had a 34% share, which comes to 1.5-lakh units. This depicts the restrained level that developers are facing in expanding their portfolio in the form of new launches. Hence, this stance of the government will keep the sentiments of the sector positive and make revival faster.

Affordable unsold stock

In Pune, trends of new launches from 2016 show that the city has predominantly experienced affordable and mid-segment supply. The move by the state government towards lowering the stamp duty will surely act as a catalyst to revive sales momentum. More than 60% of launches and stock in the city consist of affordable and mid-segment offerings, which are highly price-sensitive. Buyers in these segments will be able to save approximately INR 1.5 – 2.3 lakh on their stamp duty cost over and above developer discounts. The total discount may range between 10 and 15%, which seems to be a reasonable incentive for buyers to make the final purchase decision.

Adaptive nature of developers

Being adaptive to rapid changes in the overall economic condition, Pune developers have brought in tech-enabled services along with lenient sales and payment plans supporting buyers during these difficult times. With lockdown in place, developers created 3-D site visits for buyers to give a look and feel of apartments before booking. Despite the shutdown of site offices, sales momentum remained healthy. Furthermore, developers have reduced the booking amount to negligible (sometimes less than 1% of the house price) with an option for buyers to cancel the booking without any deduction. Developers are also offering lucrative re-payment schemes to attract buyers. Overall, the developers are trying their best to bring back the sales volume at the earliest.


As a result of these impetuses, the sector has started showing green shoots of recovery. In 3Q20, we saw a higher number of launches, with  ~55% growth from 2Q20. We are optimistic about demand and expect the city to see numerous launches by the first half of the next year to encash positive sentiments of the market. Capital values of projects stayed strong and are expected to be range-bound in the next couple of quarters. Sales have already reached 50% of the pre-COVID level, and we expect it to see faster momentum soon.

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