An advertisement by SSS Dream Homes (name changed) in a national newspaper reads ‘Prices reduced after Telangana issue, own a house near Boduppal at the earliest’ reflects the kind of desperation Hyderabad realty is currently in.
When called, the company says, prices are down by 30 per cent and a further 10 per cent discount can be negotiated. House keys will be handed over after all clearances as a mark of good gesture according to the company.
The Confederation of Real Estate Developers Association of India (Credai) Andhra Pradesh says the situation is not that bleak but there are concerns. “It is a desperate attempt by builders in the unorganised sector to take mileage out of the Telangana issue. Organised sector is more stable,” said Ram Reddy, president, Credai, Andhra Pradesh.
Real estate players in the organised sector do not see much concern on pricing considering a definite rise post decision by Centre according to Credai. However, it believes stability in the region will only be possible in the first half of 2015.
Another depressing aspect for the industry is obvious disinterest of private equity (PE) players in Hyderabad realty. “Hyderabad is not the place for PEs as they expect 25 to 30 per cent IRR (Internal Rate of Return) which is not possible now. And further compromise on price is impossible,” Mr. Ram Reddy said. The industry is dependent on banks and in-house capital which too are not positive due to lack of rotation according to him.
“The region has been battered in the past four years due to agitations related to bifurcation and confusion created by the Centre. Now, whatever may be the decision, it takes at least 3 to 4 years for the region to show some stability. No sensible investor will stake hundreds of crores in such a scenario,” said a PE investor based in Hyderabad.
Besides, banks have almost refrained from lending to promoters of realty long ago forcing promoters resort to private lending with high interest.
Consistency in sales
However, certain multi-storied projects are maintaining consistency in sales since 2009 mainly due to pan-India-marketing strategy. “We sell about 300 flats per annum and the same is maintained for the past four years. Our sales are mostly through references from customers,” said G. Anand Reddy, Executive Director, PBEL City, a Rs. 1,500-crore property in Hyderabad.
The market is dominated by the unorganised sector with 60 per cent share and the rest by the organised sector.