Real estate scenario in Hyderabad isn’t bleak but yet nothing highly positive for the market to take off at a solid speed or the investors to get attracted to immediately.
The city has witnessed the lowest number of launches among all the Indian markets and also had the lowest sales, except Kolkata. However, political stability and Metro Rail completion may fuel some upward growth apart from the recent Reserve Bank of India (RBI) rate cuts.
This assessment is based on the half yearly report on Indian Real Estate launched by Knight Frank India, which presented a comprehensive analysis of the residential and office market performance of Hyderabad for the period Jan - June 2015. Knight Frank is an independent global property consultancy headquartered in London.
Hyderabad once considered a premium market was hit by the slowdown and will require over two-years to offload unsold inventory.
The confidence of the investors is now less due to the unfinished projects. West Hyderabad holds the highest unsold inventory and yet remains the one of healthiest markets while North Hyderabad is the most affordable market owing to lack of infrastructure development.
Vasudevan Iyer, Director- Hyderabad, says that while there is a drop in residential launches and absorption levels are also low, the scenario is bound to change soon with the recent RBI rate cuts, infrastructure development with metro connectivity and further impact of the political stability.
Despite having a relatively low weighted average price of Rs. 3,500 per sq ft, Hyderabad witnessed only four per cent of the new launches. The city suffers with a very high age of unsold inventory and a large number of previously-launched projects still remain unsold in the city.
One of the reasons for such a high age of inventory is the fact that homebuyers in this market prefer ready-to-move-in properties. So a number of sales materialise once the project is ready for possession, says the report. The Eastern part of Hyderabad consisting of Uppal, LB Nagar and Nacharam have seen a healthy growth of 3 to 4 per cent in price range as people have started investing in second homes in these parts of the city.
The price range here ranges between Rs. 2,600 to Rs. 2,900 per sft. Hyderabad Central including Begumpet, Banjara Hills, Jubilee Hills and Madhapur have seen a mix and they continue to maintain a high demand with prices hovering around Rs. 4,500 to Rs. 9,000 per sft.
The price dynamics are highly localised and the variations depend on the investors’ eagerness to recover the money at the earliest, says Gulam M. Zia, Executive Director, Advisory, Retail and Hospitality of Knight Frank. However, he doesn’t see any scope for huge fall in the prices despite the large number of unsold properties.
Meanwhile, Hyderabad office market has been witnessing the lowest level in absorption since the first half year of 2014. Interestingly, this is also due to abject scarcity of good quality office space. But Gachibowli, Madhapur and Manikonda have witnessed hike in rentals and occupier interest and they remain the most preferred locations within the city.
“The office market is experiencing an unsettled scenario with demand in place but scarcity of supply. The increase in demand, declining supply, falling vacancy, lacklustre absorption and strengthening of rents shows consolidation of the office market but question remains as to how we retain and handle the momentum”, says Mr. Iyer discussing the report.
On the positive note, the share of the IT/ITeS sector was the highest in Hyderabad at 58 per cent followed by Bengaluru at 50 per cent in the first six months of the year. Traditionally, both these markets have been driven by the IT/ITeS sector.
The IT/ITeS and the other services sectors accounted for 97 per cent the total space demand in Hyderabad. But yet the space of Hyderabad offices is much lesser compared to other cities. The average deal size of all the IT/ ITeS-driven office markets is greater than 30,000 sq ft while the average size of transaction was approximately 18,500 sq ft in the city. There is a scarcity of quality office spaces with large floor plates in the Hyderabad office market, the report said. Though the city is major destination for IT/ITeS offices, the presence of service sectors like health care is growing in the city. Most of the corporate hospitals in the country are now eyeing Hyderabad market and establishing their centres driving this sector’s presence here. However, the city is not preferred by BFSI and manufacturing occupiers.
