There has been a shift in trend among investors to take position at the planning and development stages itself, says Knight Frank India research report. Over the past 2-3 years, Pune has emerged as a major Tier-II city for locating IT & ITES operations. As much as approximately 75 per cent of the total commercial space in Pune is occupied by these sectors. Apart from this, biotechnology, insurance, banking and consulting have also been driving the demand for real estate in the city.
Retail sector is expanding exponentially with more than 15 malls being planned throughout the city. Pune real estate sector is upbeat and is on the agenda of all major international funds and developers. HDFC has been a major investor in the commercial real estate market of Pune. It has invested in five buildings admeasuring 3 lakh sq ft each in Magarpatta City at the planning stage. Amdocs, Avaya, Sybase, EXL, Aviva, etc are some of the tenants in these buildings. The quoted rentals and capital values for bare shell space in this development are Rs 22 per sq ft per month and Rs 2,000 per sq ft respectively which would yield a return of 13 per cent per annum.
The company has also invested in Godrej Eternia, Phase-C at Wakdewadi which has Nell Kamal Furniture (15,000 sq ft), L&T Infotech (90,000 sq ft), Bently Software (10,000 sq ft), Wipro (10,000 sq ft) and Brick Bond Software (10,000 sq ft) as tenants. The quoted rentals here are Rs 32 per sq ft per month for bare shell space. The returns to the company would be about 12.5 per cent per annum.
Till sometime ago investors in Pune were keen only in projects which were complete and tenanted by high profile occupants. Today, there has been a shift in this trend and investors are looking at investing in projects at the planning and development stages itself. These projects will offer a higher return although there is also a higher risk exposure. A notable trend is investors moving out of existing projects to invest in other projects once they get capital appreciation. The average yields in Pune commercial market has gone down from about 14 per cent per annum during 2003 to about 12 per cent per annum during 2005.
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