With the new government’s sharp focus on creating 100 ‘Smart Cities’ in India, the subject of the ‘IT Effect’ the real estate markets of cities once again takes centre-stage. Needless to say, Pune is one of the cities with very notable IT presence.
The central government has earmarked Rs 7,600 crore for the development of 100 smart cities across India in the recent budget, and Pune should definitely be considered as a strong candidate. It is already an established ‘IT Destination’, with the success story scripted by areas like Kharadi, Hinjewadi, Magarpatta and Tathawade bearing witness to this.
Significantly, information technology has worked very well for Pune’s real estate market in the past, and it will continue to be its most decisive driving factor in the future.
The most important reason why information technology has such a positive effect on a city’s real estate market is the scale and quality of employment it generates. Employees of information technology-driven companies – whether in software development or in the IT-enabled services of the BPO industry – enjoy very decent salaries and also career growth prospects. This factor positively reinforces their aspirations towards home ownership.
Naturally, real estate developers tend to launch residential projects in or around areas with lots of employment or emerging job opportunities. However, IT/ITeS catchments generate a whole new level of demand for homes, and developers obviously have to tailor their offerings according to the type of demand that emerges from a location.
For instance, employment catchments that generate a maximum number of jobs in support services for SMEs, trade or transportation companies will yield a demand for homes in the affordable range because the employees draw relatively modest salaries. Locations in and around a city’s primary and secondary business districts generate a lot of senior jobs in the corporate sector as well as in back-office operations, so developers must aim to deliver residential projects that address a broader band of income levels.
IT-centric locations, on the other hand, present an altogether different real estate proposition in India. It is true that there was a lot of IT-driven speculation by both buyers and investors when the IT boom first took off in India. However, after the Dot.com bubble which had been building globally between 1997 and 2000 burst in 2001, information technology in India went into a rapid process of evolution. Jobs generated by this industry became more stable, and its employees once again became a focus point for real estate developers as well as lending institutions.
Salaries in the sector began rising steadily, and more and more young Indians were sent abroad for training, only to return with higher aspirations, a wider world view and a taste for luxury. This is when cities like Bangalore, Hyderabad and Pune started to develop a notable market – and new precinct – for high-end housing.
The IT businesses that established themselves in India did not need to have their operations in the city centres. In fact, they preferred to open shop on the outskirts of these cities, since land and leasing costs were lower there. This led to entirely new residential property catchments cropping up, and developers began launching housing projects in and around these areas. In fact, even retail follows the direction into which information technology points, which is why we see more and more malls coming up in IT-centric locations of Pune.
Some of the most prominent IT-driven real estate locations in Pune today are Aundh, Baner, Ambegaon, Kharadi and Undri. More and more areas will open up as the information technology wave continues to sweep the city, and Pune’s inclusion in the government’s ‘Smart Cities’ initiative would be a massive break-through for the entire city – both in terms of its overall economy and its real estate market.