The city has witnessed a pick-up in sales and land transactions, appreciation in property prices, more project launches and a return of private equity investors, during a time when larger markets like National Capital Region (NCR) and Bengaluru are struggling.
Owing to stable government in Telangana and its initiatives to attract investments, Hyderabad is fast emerging as one of the hot spots for PE investments in real estate. PE investments in Hyderabad increased to $292 million between January and September this year, from $12 million during the same period in 2015, according to a November report by property advisory Cushman and Wakefield.
Property sales in Hyderabad increased 19% to 5.7 million sq.ft in the September quarter compared to the corresponding period a year ago, according to Liases Foras Real Estate Rating and Research Pvt. Ltd. Hyderabad and Ahmedabad are the only two cities which saw double digit price rise during the period when NCR, Kolkata and Pune saw a reduction. Prices rose in Hyderabad by 10% to Rs4,634 per sq.ft, the report said.
“Infrastructure and the government’s efforts towards the ease of doing business have proved to be critical advantages for Hyderabad and it has positively impacted real estate growth as well. Right now, commercial office projects are driving investments, and we expect residential development to significantly surge over the next 6-9 months,” said Trivita Roy, associate director, research and real estate intelligence service at property advisory JLL India.
To put things in perspective, Hyderabad’s comeback is significant for a market that was washed out due to political turmoil and uncertainty. Since 2009, the city suffered a prolonged economic slowdown and political unrest, leading to the formation of Telangana, which was carved out of Andhra Pradesh on 2 June 2014. The uncertainty ended when Hyderabad was named the joint capital of Telangana and Andhra Pradesh till 2024, after which the city will be completely transferred to Telangana.
This year, taxi aggregator Uber Technologies Inc., the world’s most valued start-up, opened its first service centre in Asia in Hyderabad, Apple Inc. established its first development centre in India in the city and Amazon.com Inc. said it will open its biggest campus outside the US here by 2019.
“We are very bullish on Hyderabad. The company has 13 million sq.ft of IT space underway, we are buying new land parcels, building a shopping mall and just launched a new residential project which is priced at a premium ,” said Bijay Agarwal, managing director of Bengaluru-based realty firm Salarpuria Sattva Group.
Earlier this year, Blackstone Group Lp invested Rs.470 crore Salarpuria’s ongoing office park project in Knowledge City, marking the global private equity fund’s first investment in the city. Over the last year or so, office rentals have risen by 30-35% in the city, and so have residential prices, but property analysts say that despite the strong signals, the city is still far from a complete recovery.
“The fundamental growth drivers are showing positive signs, but Hyderabad’s performance in real estate is still inconsistent and needs to maintain the pace and momentum,” said Pankaj Kapoor, managing director, Liases Foras. JLL’s Roy said that the concerns are that the city still remains an IT/ITeS and research and development destination, and needs to throw up more, varied opportunities for corporates and investors.
“While there is scope for price to appreciate further, they need to be in check because pricing is a key edge that the city has over some others. Finally, office real estate is doing well, but there is limited space and few locations which have the potential for good quality office projects and that needs to expand,” she said.