Hyderabad real estate playing the catch up game

Hyderabad’s realty market has seen a lot of ups and downs over the course of last decade. There are reasons for this rollercoaster ride but finally it is something that investors are learning to deal with ushering some stability in the market.

Housing is a basic necessity of human beings. Going by this logic, the demand for residential property will always be there no matter how sluggish the economy is. The quantum of demand is what decides how a particular real estate market will perform. However, Hyderabad is a special case that demands special mention. Here, in addition to the usual factors that affect the real estate growth of a city like social infrastructure, healthcare and connectivity, political sentiments have played a huge role in determining the trajectory of real estate growth. The “Telangana uncertainty”, as it has come to be known in real estate circles, has brought a lot of undesired attention to this city of Nizams, which in turn has had its side effects on the expansion of property market. Investors were shying from dropping their cash and builders were reluctant to launch new projects as vacancy levels were at an all time high. The demand for the new state Telangana still being in a limbo, the situation hasn’t changed much. Or has it?

- The Hindu

– The Hindu

Prices are at an all time low, best time for office space and residential investment

A widespread economic meltdown and political uncertainty contributed to the steep fall in prices of commercial and residential real estate of the city. The office rentals declined by a whopping 22 percent in 2012, effectively making it the second cheapest city in the world to invest in and the cheapest amongst the top eight real estate markets of the country. This signifies a greater possibility for those who want to invest in the commercial or office segment of real estate in Hyderabad. As per the calculations of analysts, the coming five years will see an introduction of 25 million square feet office space, out of which 22 million square feet is expected to be absorbed immediately. This optimism is riding high on the robust performance of sectors like IT/ITeS, engineering & technology, medicine and biotechnology amongst others. The micro trends suggest that offices will prefer peripheral locations HiTec City, Madhapur, Kondapur and Gachibowli as compared to the Central Business District. In the wake of a sluggish economy, companies will adopt modest means of operations and hence Hyderabad comes as a natural choice owing to the reasons discussed above.

The city’s infrastructure is already gearing up for the future. The construction of the IN 14, 132 crore Metro Rail Project, which is considered to be one of the largest of its kind projects in the world is already underway. This 72-km long network will have three high density corridors, 66 elevated Metro stations and is expected to be fully operational by July 2017. This development means good news for residential real estate as well. The effects are already visible as a consultancy firm Knight Frank recently found out in its survey. The survey revealed that the first quarter of 2013 saw a launch of around new real estate projects in Hyderabad comprising 6,000 residential units, which is actually 45-50 percent lower than the actual capacity. However, the market sentiments have improved considerably from the last year’s subdued phase.

Still a lot to catch up

Bangalore and Chennai continue to be the cynosure of real estate developers and investors amongst the south Indian cities. These are robust markets, and have proved their mettle time and again. Although odds are stacked against Hyderabad, affordability is a big advantage that it has over its real estate counterparts and if service sector keeps on showing good signs of growth then there is no reason to not believe that Hyderabad will usher a new realty revolution in India, on the lines of Gurgaon and Bangalore.

- Mahesh Sharma (Guest Writer)

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