Hyderabad favoured destination for investment

Vibrant cities for vibrant economy-VII

By: Track2Media Intellisearch

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Hyderabad continues to be a favoured destination for investments due to its unique infrastructure, and real estate prospects are promising despite the Telangana agitation. Realty experts believe Hyderabad’s new international airport, the rapidly-growing urban infrastructure, satellite townships, cosmopolitan lifestyle & culture, and large employable talent pool for the services sector make it attractive for IT, hospitality and other services sector.

Hyderabad is basically a services sector growth-driven market and the infrastructure is getting better by the day. While the IT sector spreads to new areas around the city such as Uppal, Pocharam, Bachupally, Jawaharnagar and Shamshabad, other industries are also setting up base in the city. New investments are expected in pharma and biotech, manufacturing SEZs and research & education.

According to the Jones Lang LaSalle (JLL) report, the growth in the IT sector and new infrastructure projects such as the Hyderabad Metro is expected to give a push to housing and retail investments in the city. Investor perception of Hyderabad’s real estate market is set to turn positive.

The report said the market had remained still in the last few years because of the economic recession and relatively uncertain political conditions immediately following it. The period, which saw a correction in valuations to an extent of 30-35 per cent, was a short-term phenomenon and investor sentiments would bounce back, it said.

According to the report, though a few Greenfield projects have remained stalled, many residential projects which had seen PE investments are witnessing good sales. Hyderabad is still much more affordable, with property prices in prime precincts of the city being relatively less than in other cities.

The President of Andhra Pradesh Real Estate Developers’ Association (APREDA), Prem Kumar, admits prices have bottomed out, but input costs have gone up significantly. “We don’t see much downside from here. On the contrary, prices could firm up. Therefore for buyers, who are keen to acquire a property, there should be no reason to postpone,” he says.

Realtors believe setting up of new projects, such as the new international airport and educational institutions around Hyderabad and new IT projects in the suburbs creates new jobs that attract people to invest. This will happen again, even though the city may see a momentary subdued phase.

According to real estate consultants Cushman & Wakefield, a total demand of 2.3 million units of residential property is likely in the next five years, and the estimated supply is likely to be approximately one million, leaving a gap of approximately 1.3 million.

Unlike upward pressure on prices in cities such as Mumbai and Bangalore, where the supply is less, Hyderabad may see a lower demand-supply gap, therefore it is unlikely to see appreciation of capital values.

In another report, Cushman & Wakefield, while discussing commercial property, stated that Hyderabad, along with Chennai and Kolkata, would see a little gap between demand and supply, due to more cautious and planned developments, supported with the higher growth potential of demand.

APREDA maintains that business sentiment is better, and some of the developers are looking at launching new projects after a subdued phase.

However, just when things were looking up for the real estate sector, with some of the property developers jacking up prices by Rs 50 to Rs 200 per square feet, after a prolonged subdued phase, the agitation has impacted the overall business sentiment and also that of the buyers, a cross-section of real estate developers repent.

Speaking at an event organized by APREDA, the Chief Minister N Kiran Kumar Reddy recently stressed on the importance of the sector, which is one of the highest revenue grosser for the state. Speaking about the Government’s efforts to construct the Outer Ring Road and bring to the city the metro rail, the Chief Minister said that the two developments would greatly benefit local construction firms as they would add to Hyderabad’s infrastructure.

“The Hyderabad Metro Rail project is faced with some teething problems at present. But we have full faith in the company (L&T) and I am sure it will start work on the project soon,” Reddy claimed. Speaking about affordable housing, Reddy said that it was important to provide homes to people from all sections of society and even appealed to buyers to invest in Hyderabad’s property, the ‘T’ stir notwithstanding. “This is the best time to buy property in the city as rates have dropped significantly,” he said.

The Government’s plan to move industries from the city to the outskirts opens up opportunities for investors to acquire industrial land at good valuations for use in residential projects.

While the going during 2011 has been good for realtors, they believe 2012 can be the turnaround year notwithstanding the Telangana issue. Developers are not deterred by the consequences of the agitation, as they believe the state’s and cities fundamentals are strong.

They prefer not to get engaged in a dialogue on the T-issue as this is something which they have been grappling with over the last four to five years, each time such a development disrupting their business. This is also responsible for relatively subdued pricing compared to other major cities in the country.

However, it does not matter whether separate State is formed or not. Those who are in need of a house will buy the property any way, developers maintain.

Advantage Hyderabad