By: Om Ahuja, CEO – Residential Services, JLL India
Track2Realty: A few years back, Hyderabad was offering the likes of Bangalore stiff competition for attracting office space investments. Today, the formation of a new state, a new government and a stabilized political environment are yet to instill the confidence that is needed to revive Hyderabad’s real estate fortunes.
With the Telengana movement picking up pace, other cities emerged as destinations for IT and ITES players and Hyderabad lagged behind in the race.
Hyderabad’s superior infrastructure, affordability and cosmopolitan ethos could have helped it score over many other cities which lack these attributes. However, the city is still caught in a slump caused by the partition of two states, and accompanying bifurcation of resources.
The bureaucratic machinery is still trying to sort out domicile issues, roles and postings of the involved IAS/IPS officers, and proactive decision-making is visibly lacking.
The political effect
Basis the prolonged uncertainty over the last few years, it was expected that the creation of Telengana would usher a stable policy regime into Hyderabad. However, it is evident that the kind of clarity that is needed to fully revive sentiments is still to come.
However, it is not practical to expect overnight results – the successful creation of a new state and the revision of administrative machinery takes time. It makes no sense to harbor unrealistic expectations and come to any premature conclusions at this point.
On the plus side, the new state has a new party with a dynamic chief minister who is very conversant and involved with the ground realities. Both the party and the government are determined to make Hyderabad a crown jewel for Telengana in terms of new initiatives and developments.
This involves building confidence, providing stability – and, obviously, attracting investments. If this determination is followed through upon, it is not unlikely that Hyderabad will once again offer direct competition to other key IT/ITeS destinations in early 2015.
The Telangana government’s budget is expected to provide more clarity on new initiatives and the status of many infrastructure related developments. Corporates currently invested in Hyderabad are looking forward to this clarity, which will help them take decisions on their expansion plans and investments into the city over the coming months.
Commercial real estate – positive prospects
On analyzing commercial leasing and absorption in Hyderabad over the last few years, it emerges that Grade A commercial leasing picked up from 6.8% in 2011 to 8.6% in 2014. In spite of the uncertain political environment, Hyderabad still held a 9% share of total Indian office leasing. It is quite possible that Hyderabad’s share could move into double digits over the next few months.
Factoring in that Hyderabad will see approximately 2.4 million square feet of Grade A office space leasing in 2014, and using the rule of thumb that every 100 square feet generates one job, Hyderabad will be generating 24,000 jobs or more in 2014. This is not a bad run-rate by any yardstick. There are firm indications that this trend will increase in the near future, leading to faster and sustained job creation in Hyderabad to boost demand for housing.
Residential supply
When compared to other Indian cities, Hyderabad is the only city which has displayed a less-than-robust trend in terms of new residential launches over the past few years. In light of the anticipated pick-up in office absorption and job creation, this effectively means that the supply of quality residential projects will become a challenge in the coming months. Also, unlike other cities, Hyderabad’s residential capital values have not yet breached the 2008-2009 levels.
In other words, price appreciation has at best been moderate in Hyderabad. However, the prospects of an improving market environment make Hyderabad an excellent mid-to-long term property investment destination, especially factoring in the relatively low entry points prevailing now.
Residential zones – end-users and investors
Hyderabad can be divided into five broad zones for evaluating residential real estate investments:
1. Hitech City–Gachibowli: The most lucrative and well-established zone. With maximum office supply absorption in this zone, it has the maximum potential for capital appreciation and growth for investors with a 5-7 years investment horizon.
2. Uppal-Pocharam: The execution of the Hyderabad Metro will bring Uppal, the Infosys campus and the Raheja IT campus in Pocharam closer to the city, and therefore attract more home buyers. Capital values are currently as low as Rs. 2500/sq.ft., and the prospects of substantial capital appreciation over a 8-10 year horizon are considerable.
3. Miyapur-Chandanaga: Being closest to Hitech City and just 8 km away from the well-established zone, this corridor attracts budget segment home buyers who cannot afford the rates in the Hitech City-Gachibowli belt. An emerging location with good roads and social infrastructure, it has potential to grow with well-established gated communities in a specific budget range.
4. North-West Corridor – The Pharma industry is doing well in East Hyderabad, and this will fuel growth of investments into villa projects on Outer Ring Road. Capital values for such units currently range in between Rs. 1.50-2. 5 crore; again, there is attractive growth potential.
5. Jubilee Hills-Banjara Hills: Residential prices in these areas, which are Hyderabad’s most premium locations, are still significantly lower than those being quoted in the suburbs of Mumbai and Delhi. Here are some of the existing projects where high-profile residents currently or aspire to live in these locations, which also see the highest demand from expatriate HNIs. In terms of affordability, the price range for most of these projects is very attractive:
Top identified established & emerging projects
Like every other Indian city, Hyderabad has multiple projects which people aspire to buy into and become part of a distinctly upgraded lifestyle. Basis the demand and potential, here are the top six high-profile projects with robust demand from buyers looking for the ideal address and a property that has notable grow potential in terms of capital appreciation:
| Sno. | Building Name | Area Name | Premium/demand Driver | Current Indicative Budget
To afford such apartment/property |
|||||
| 1 | Orange County – Apartments | Gachibowli | High-grade luxury project bracketed by the financial district, IT and ISB. Occupied by expats and HNIs | Rs. 1.30 Cr onwards | |||||
| 2 | Meadows – Villas | Gachibowli | High-grade luxury project bracketed by the financial district, IT and ISB. Occupied by expats and HNIs | Rs. 4 Cr onwards | |||||
| 3 | Mantri – Apartments | Jubilee Hills | Prime location with a view of the 400-acre KBR Park, high-end specifications with all amenities. | Rs. 10 Cr onwards | |||||
| 4 | Brigade @ 7 | Banjara Hills | Premium location, gated community, high-end specifications, only 55 apartments on a 3-acre plot. | Rs. 4 Crs onwards | |||||
| 5 | Stone Valley – Apartments | Banjara Hills | First residential gated community in a prime location, all amenities. | Rs. 4.00 Cr onwards | |||||
| 6 | Silicon County – Apartments | Hitech City | Premium residential gated community with all amenities in the middle of Hitech City IT Corridor | Rs. 1.50 Cr onwards |
