Pune real estate and information technology are inseparable concepts today, and it is interesting to reflect on how this came about. To understand the ‘IT Effect’ on residential real estate in Pune, one needs to understand how Indian real estate has been changing over the years.Every year, we hear of new property investment destinations coming up. Some work out well for property investors, and some do not. Whether or not a property investment destination in India lives up to its initial potential or not depends on a number of factors.
One of the main factors is employment. An area in which a number of companies are opening up job opportunities for the local population becomes of interest to residential property developers, because they know that people want homes near to their places of work.
Developers do a lot of research before they decide to launch a residential project in or around an area with a lot of existing or emerging job opportunities. It is important for them to know what kinds of companies are offering jobs, because the nature of these jobs indicates the employees’ salary range. If the jobs are mainly for retail or support services, this indicates that the employees will be drawing relatively smaller salaries. In other words, budget housing will be in greatest demand in such an area. Luxury housing would not draw any interest.
On the other hand, jobs created by large corporates and multi-national companies tend to offer a much wider band of incomes. Such companies create back-office, middle management as well as ‘C Suite’ jobs. This means that developers can launch projects that cater to a wider band of income levels – affordable housing, middle-income housing and luxury housing. Homes in all these categories will be in demand.
This would have remained a predictable formula for Indian real estate developers to follow if job creation in India would have remained at the level of manufacturing, retail and financial services. However, matters changes drastically when India launched into its Information Technology boom in the mid-1990s.
This was the period in which more and more companies, mainly from the United States, started outsourcing IT-related jobs to India. Even when the resulting employment was mostly limited to call centre jobs, a lot of young Indians began at salary levels which their parents had worked half their lives to reach.
Back then, home loans were quite affordable at interest rates between 7-8%. High salaries at a young age meant long repayment tenures for home loans, translating into attractively low EMIs. This, coupled with the inherent yen for every Indian to own their own home, launched the IT-linked housing boom in India.
Within a relatively short period, the jobs being created by the IT industry in India went beyond call centres and medical transcription and began involving software development. Salaries skyrocketed, and more and more young Indians were sent for training to the US – returning with a wider world view, higher aspirations and a taste for luxury. This is when cities like Bangalore, followed by Hyderabad and Pune, became hotbeds for high-end housing.
These foreign IT companies needed large spaces to set up shop. But unlike banking and retail, they did not need to be in the city centres, so they opted to launch their campuses in areas of Indian cities where the land costs were still low. To compensate for the distances that employees living in the city would have to travel to reach their work places, they offered them gratis shuttle services.
However, then the ‘real estate effect’ began to take hold in these areas. Developers started launching housing projects around these IT hubs, and the demand for homes close to these companies continues to be huge. This is why the profiles – and the real estate prices – in these previously unknown areas began rising.
Today, IT hubs such as Hinjewadi, Tathawade, Kharadi and Magarpatta in Pune are literally dictating the trend of residential real estate development in and around these areas. Aundh, Baner, Ambegaon, Undri and many other locations from which these IT parks can be reached are seeing massive development. The response by property investors has been huge, because residential real estate rates in these locations are rising with every passing quarter.