Hyderabad RE: On Growth Track

Real estate sector has been on a bumpy ride since the last few years. While some markets are still limping back, some have already surpassed the pre-Covid levels. Construction Times takes a peek in to the real estate scenarion in Hyderabad.

At a time when the economic activities are resuming, the sluggish real estate sector in India is alos making a remarkable recovery from the shackles of the pandemic. The recovery, which began in the Q4 of 2020 catalyzed by stable repo rates, stamp duty waivers and low interest rates, was temporarily halted in Q2, 2021 when the second wave of Covid-19 hit. However, the trends in Q3, 2021 reveal that top realty markets that were derailed from the recovery path seem to be getting back on track.

“The real estate sector recorded a smart recovery despite the pandemic exigencies in 2021 with segments like residential outperforming others. The disruption caused by the pandemic is slowing settling and the real estate market is expected to gain back its rhythm in the next two to three quarters, albeit, the threats of the new variant is adequately contained with minimum disruption in the early part of the new year. Should we be able to continue at this pace, the real estate sector will see adequate recovery to match or indeed cross the pre- pandemic levels,” Shishir Baijal, Chairman and Managing Director at Knight Frank India said.

Of the top seven metros, Hyderabad, known as the City of Pearls, witnessed a significant development in the real estate market.

"Attributed to robust government policies and participation of private entities, the road connectivity and infrastructural development in Hyderabad has reached a new pinnacle. The residential segment has grown manifolds in the western fringe of the city with the completion of metro lines and the new proposed extensions off outer ring road set to enhance connectivity," a recent report by proptech firm Square Yards revealed.

Given such amenities, Hyderabad stood second in terms of adding new residential projects to its kitty, with west Hyderabad accounting for about 60% of the total projects launched in the city. Contrary to the previous quarter, where majority of the share (about 90%) was concentrated in the western precinct, in Q3, 2021 North Hyderabad also contributed 35% to the new launches in the city. This clearly delineates north and west Hyderabad to be the emerging hubs for both residential as well as commercial development.

Despite the positives, the builders in Hyderabad are sitting on an unsold inventory of 58,535 units as of September 30, according to data released by Anarock Property Consultants.

The inventory on June 30 was 50,580 units. While nearly 8,000 units were added to the market between July to September, the real estate sector managed to sell only 6,735 units in this period, leading to an oversupply in the market.

“Hyderabad turned out to be the only city in India with the highest increase in the available inventory with nearly 58,535 units available for sale. Furthermore, a sharp rise in the new supply over the past few quarters has increased the city's available inventory by 113 per cent compared to the same period in the previous year,” said Prashant Thakur, Director, Anarock Property Consultants said.

The demand has been largely inclined towards budget homes. The report by Square Yards revealed that more than a quarter of the inventory accounted for mid-segment properties priced at Rs 30-60 Lakhs. These were largely  concentrated in localities such as Maheshwaram, Narepally, Patancheru among others.

"As per search trends, nearly 60% property seekers looked for properties in the Rs 30-60 lakh and Rs 60- 100 lakh budget ranges. There seemed to be a dissonance when it came to luxury properties. While more than 20% prospective home buyers searched for properties priced at Rs 1-3 crore, the inventory in the market did not seem to be aligned," it said.

According to a report by CBRE, property prices have grown at a CAGR of about 2-7% across the mid segment since 2010, with Hyderabad, Bangalore and Pune recording growth at the higher end of the range. Simultaneously, over the past decade, income levels too have increased.

The Affordable Rental Housing Complex (ARHC) scheme and passage of the Model Tenancy Act, 2021 (MTA) are the first few steps towards formalizing this segment, demand for which is expected to grow exponentially over the next few years, noted Anshuman Magazine, Chairman, India & South-East Asia, Middle East & Africa, CBRE.

“The Model Tenancy Act will be a game-changer for the Indian rental housing segment. The Act is expected to encourage private participation and help monetize the vacant rental stock by infusing trust in landlord-tenant relationship, in addition to providing a speedy dispute adjudication mechanism. We further expect the Act to have far-reaching implications towards formalizing the housing market in India,” Magazine said.

Hyderabad also witnessed two mega land deals for residential development for a total of 78 acres worth Rs 1,050 crore in 2021 so far. The two separate deals over 78 acres of land are meant for large scale residential development projects and have taken place in Narsingi (ORR) and Shamshabad,

According to Santhosh Kumar, Vice Chairman, Anarock Group, “Nearly 28 separate land deals for over 1,205 acres took place between Q3 2020 and November 2021 for residential development in the top seven cities of India including Hyderabad.”

As far as the commercial real estate is concerned, Hyderabad emerged as market leader in terms of office sector demand in Q3.

“After an average performance in Q2 2021, Hyderabad emerged as one of the resilient cities in terms of demand supply dynamics. For the first time, Hyderabad had the maximum share in leasing volume at 2.5 million sq ft surpassing Bengaluru, as occupiers focussed on large block deals and even leasing entire buildings. BFSI and Flexible workplace sectors had the maximum share in leasing volume accounting for 66% of the total demand in Hyderabad. Rai Durg saw the maximum leasing traction accounting for 53% of the demand, while Hitec City contributed 40%. On a YTD basis, Bengaluru continues to be the market leader,” said Ramesh Nair, Chief Executive Officer, India & Managing Director, Market Development Asia, Colliers.

Given the current market dynamics, the real estate sector in Hyderabad is poised for a rebound.

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