The “Realty factor” seems to be returning in the minds of the denizens of Hyderabad. For, the property prices are on the rise in the twin cities once again, bringing much relief to the battered and bruised builders, who are eagerly waiting to off load their “shelf stock of their long-constructed dreams.” The rise in the prices may not be to the expectations of the city builders, but the trend is certainly picking up, albeit slowly.
According to market sources, “there is a positive environment prevailing in the city’s landscape now. Salaried sections and businessmen are willing to put their money back in real estate. But, the percentage may be low yet, but the pace is slowly picking up,” a city builder said.
Certainly, there is a confidence in the air. After a long gap, two property websites have taken the initiative to conduct realty exhibitions in the city recently. And the organizers said the response received during the shows was “encouraging, if not extremely good.” Several top realty companies have put up their shops during these shows, and they also expressed a similar opinion. “Many potential buyers had turned up and made enquiries about the properties. We have received a couple of bookings as well. But it is too early to say that the market has recovered. But, certainly, things are looking a lot better than last two years,” a top executive of a leading realty company in the city said.
In the aftermath of the “double trouble” of very intense scale that the Hyderabad realty had witnessed in recent times, this positive news is something to cheer about for the city builders. It all started with that “dreaded Recession” which literally shaken the world economies, resulting in spiraling down of the prices in the realty sector. In fact, it all started with the collapse of realty market in the US with major financial institutions and banks closing down their business due to mortgage loan crisis. This trend spread to entire world, with major economies sinking and slipping to unexpected lows, there was a gloomy environment everywhere. The crisis triggered by Recession seems to be not over yet as many countries still battling hard to improve their sagging economies. This situation is particularly evident in the European market, where many countries yet to weather the storm that swept across the nations.
In fact, India was one of the first few countries to make a dramatic recovery in a very short span, rising hopes for many countries across the world. And, this in fact, has earned accolades from many countries with US President Barack Obama himself heaping the praise on Prime Minister Dr Manmohan Singh for his excellent management of the economy. The US President’s comment at the recent G-20 Summit, who said, “The world listens when Singh speaks” clearly shows the rising stature of India at the world level.
Returning back to Hyderabad realty sector, when the Indian economy showed signs of recovery, there was yet another storm that literally tore down the hopes of the builders. In fact, the separate Telangana state agitation did more damage to Hyderabad realty than the dreaded Recession. Since, many Hyderabadis are not really sure, how the market mood swings, if at all the Telangana state is carved out from the currently united Andhra Pradesh. This uncertainty is keeping the many investors on the tenterhooks.
If at all the separate Telangana state is formed, many rich Andhrities, particularly, the coastal Andhra people may not show the same inclination to buy properties in and around Hyderabad. That is the worst fear, the twin cities builders are faced with now. For, it is this rich Andhra community world-wide which invested heavily in the Hyderabad realty market. Their huge investments triggered the so called realty boom that the twin cities had witnessed in the recent times. And, particularly because of this reason, the realty sector is eagerly waiting for a clear solution for the ongoing Telangana problem.
The prospect of a separate state of Telangana seems to have made many buyers postpone their much-awaited ventures, due to the fear that prices may crash land literally. The separate Telangana movement has already made a significant impact on the realty prices in the peripheries of Hyderabad, Ranga Reddy and Medak districts. The land prices in these far-flung areas have already witnessed a significant dip. The reason is simple: the rich Andhra sections are not really showing the same inclination to buy properties in and around Hyderabad. This conclusion can be drawn from the fact that many many immigrant professionals, particularly those belonged to Information Technology (IT) , pharma and other professionals, who came for jobs or some other purposes, did not make any major investments in Hyderabad realty. In fact, it was Andhra’s rich class, which forms a significant portion among the buyers of Hyderabad realty sector. The creation of a new state might deplete these speculative investors.
Positive growth:
However, the property prices in twin cities have shown a marginal increase of 2.2%, in the month of May. The index has gone up to 911 from 892 in the month of April 2010. However, compared to other major metro cities in the country, the growth rate has not been so impressive. This is largely due to ongoing Telangana movement, say market sources. Over the last one year, i.e. between May, 2009 to May 2010, most cities have seen significant increases in property prices. Cities like Kolkata, Ahmedabad and Delhi have seen a very steep rise in realty prices, up to 30%. Pune, Mumbai have also seen a growth rate of between 14-25 per cent. In comparison to these cities, Bangalore has seen a modest rise of 9.7%. These cities have led the National Index to move up by 17.4% over the last one year. But, it’s not the same with Hyderabad, and Chennai, which have seen a reduction in property prices in the range of 9-12% in the same period
In Hyderabad, the long-term investors are worried about the future of realty sector here. The uncertainty seems to be the major factor that has been bringing down the prices. Besides, there was a steep hike in prices during the boom period, which resulted in property prices skyrocketing beyond the reach of the middle-class families. Besides, the excessive capacities built during the boom period, still lying vacant. And many builders, who had invested heavily in these projects, had incurred huge losses. And, they are ready to sell off these properties, at base price and even for small percentage of losses. And this urgency among the builders, and downward market trend, has led to correction in prices.
Besides, due to prevailing conditions, the market recovery has been slow, which was expected. Price corrections were not attracting buyers, who were themselves suffering from job losses or an uncertain future. Over the year, Indian economy slowly but surely emerged stronger and though the prices did not go up quickly, big money started coming back into the market.
The land prices witnessed a steep rise of 30 to 40 per cent during the realty boom. But during recession and later due to Telangana movement, the prices have come down drastically, particularly in the outskirts. But a few buyers are still waiting for better prices, but builders are thinking otherwise. So, there is a waiting game being played as well.
On their part, the builders say, land prices in the outskirts have already bottomed out and are more or less being sold at cost price now. And, there is unlikely any significant drop in the prices even if land prices go down by further 10 – 15% in the very short term. As per the current prevailing prices, Hyderabad is offering the cheapest rates compared to any other city of its size and resources in the country, say some builders.
But, there are a few positive factors. The state has decided to increase the market value of land besides reducing the stamp duty, giving a major boost to realty sector. And a good monsoon, may bring back buyers to the market. Commenting on the current situation in Hyderabad realty, one executive of top firm said, “In first place, the mood in the market is quiet upbeat now. With Indian economy showing good recovery in short time. And the budget presented by Finance Minister Pranab Mukherjee added to this optimism. In fact, the budget has been received positively by market. There is an overall improvement in almost all sectors. And most importantly, even the job market has shown positive growth, which show propel the growth of the realty sector as well as salaried class should come forward to make investments again. It’s only a matter of time. But for sustained development, it is critical to maintain property prices at the current level. Attempt to increase property prices can lead to fall in demand,” he said.
The first major advantage is: The middle class, the major economic drivers, are willing to put their money in real estate again. If one looks at the demographic profile of the residential buyer in the last one year or so in the city, the most buyers are end-users and intend to buy apartments to occupy them. The buyer is a working professional or businessman and related to IT, Pharma or infrastructure businesses. The business growth of these sectors is not dependent on the creation or non-creation of separate Telangana state. The only factor that is causing anxiety is the uncertainty that grips the city, with agitations and disruption of work.
Hyderabad’s long-term prospects as a city of growth with availability of resources for IT sector remains unchanged. With IT sector once again showing positive growth, the city’s real estate is bound to bounce back to higher levels. “There has been a lot of development taking place in around Hyderabad city with projects like outer ring road area. Besides, several top IT companies are on the expansion mode in the city. There are many IT professionals, NRIs, doctors and others, who are willing to buy properties here. Besides, the land and property rates are at low level in Hyderabad compared to other major metro cities in the country. So, this is the right time to invest in Hyderabad realty,” said one realty major executive.
Telangana or no Telangana, Hyderabad with its ready infrastructure, is certainly to remain as one of the major investment destination for software and its allied companies, which may result in positive growth once again. The creation or non-creation of a separate state cannot influence the buyers of realty here, say experts. Finally, if the Manmohan Singh government decides to clear the confusion hovering around the separate Telangana state, the Hyderabad realty can once again look forward better days to come.