Pune’s industrial real estate legacy

By: Rohit Gupta, Head – Agency Leasing and Industrial Transactions, Jones Lang LaSalle India

Pune has been a favoured industrial destination for a very long time. In fact, manufacturing has been a major development focus for the city since the inception of PCMC in the 1960’s. Since then, there has been a massive influx of European companies who were and continue to be keen on setting up manufacturing facilities there.

The arrival of these industrial entities triggered off a whole slew of other manufacturing establishments, both Indian and international, and established a continuous industrial growth pattern in Pune. The formation of the MIDC in the Pimpri Chinchwad Municipal Corporation resulted in a constant process of industrial land acquisition and the creation of required support infrastructure.

Thanks to the Government’s LPG (Liberalisation, Privatisation and Globalisation) policies, Pune’s industrial growth is supported by a huge availability of trained man power from various local educational institutes. Another advantage that Pune’s industrial sector offers is the significantly lower cost of real estate when compared to other industrial hotbeds in India. The proximity to Mumbai, India’s business capital and primary port, is – so to speak – the icing on the cake.

Rapid Organized Growth

The outstanding response to the MIDC at Pimpri Chinchwad ushered in the formation of other such manufacturing hubs. The MIDC in Hadapsar was established in the 80’s, and the 90’s saw the development of Hinjewadi’s MIDC, which supports both IT and manufacturing industries. Further ahead came the five star MIDC at Ranjangaon, which represented an entirely new evolutionary step for MIDC standards.

These industrial zones combined to put the final flourish to one of the country’s most oustanding masterpieces of industrial development. Over the years, Pune has maintained and grown its reputation as the preferred Industrial location for Indian and international companies alike.

The Real Estate Factor

It is an established fact that there is a direct correlation between a city’s industrial development and its real estate growth. In Pune, areas such as Pimpri-Chinchwad, Talegaon and the Chakan belt, Sanaswadi, Pirangut, Shirwal and Ranjangaon are centres for the manufacture and assembly of commercial vehicles, locomotives, electronic consumer durables, pharmaceuticals and a number of intermediate goods. These areas have therefore seen unprecedented real estate development in stable real estate market conditions defined by realistic property prices.

The modus operandi that major industries follow is to first procure real estate as assets and then proceed with built-to-suit development for their operations. Auto ancillaries and other small and medium scale industries prefer to begin with leasing industrial spaces, launching operations and then concentrating on gaining strength and momentum. Finally, they will start acquiring land for their expansion initiatives.

Demand Scenario

As things stand today, Pune’s industrial real estate sector is extremely dynamic. In fact, it is probably the only sector where demand is outstripping supply. There is huge demand for readily available quality industrial spaces with clear land titles.

With many original equipment manufacturers (OEMs) making a beeline for Pune, there has been a corresponding ripple demand effect from Tier 1, 2 and 3 ancillaries who supply raw materials to such companies. Implied therein is a huge and uniquely differentiated opportunity for developers, since this sector – unlike IT/ITES and residential real estate – is currently not being catered to by a sufficient number of organized builders.

Today, Pune’s most happening growth corridors for industrial real estate are Chakan-Talegaon for auto and auto ancillary industries and the Nagar Road-Ranjangaon belt for the same sectors, in addition to consumer goods manufacturing. Shirwal is also gaining momentum, largely because of the competitive real estate prices there.

The following industry sectors are generating the highest demand for industrial real estate for anything between 5-20 acres in Pune: