Taking a break

Blame it on IT. In Hyderabad, like Bangalore, the real estate market is driven by its IT industry, except that when compared to its more famous southern counterpart, the size of Hyderabad’s IT industry and the number of people who work in it are smaller.

Hence, there has been no appreciable rise in real estate prices over the last 12 months. Take a sought-after location like Gachibowli outside of Hyderabad.

Here, rates are said to be levelling off at last year’s level of Rs 4,000-4,500 per sq. ft. “Instead of speculative purchases like in the past, there’s more of genuine buying taking place today,” says Alluri Ranga Raju, Managing Director, Nagarjuna Construction Company.Real estate consulting firm Cushman & Wakefield says that the rise in home loan rates has led to potential buyers deferring their purchase, which in turn has led to the stagnation.

Key trends Residential prices are stagnating at the moment and deals for luxury apartments (Rs 70 lakh and above) are being sweetened with offers such as modular kitchens Demand for office space from IT companies is stagnant. However, there is limited supply as well. So, prices are unlikely to fall and rentals are expected to remain stagnant. During 2007, no new malls came up in the city, but fresh space is likely this year. Rentals are, however, expected to appreciate till end of 2008 due to limited supply.

Unless interest rates soften—that seems unlikely at present— there could be a drop in housing demand, it says. “A combination of local and global factors are prompting potential buyers to wait and watch,” says E. Sunil Reddy, MD of IVR Prime Urban Developers.Despite that, the real estate market in the city is buzzing, courtesy the new international airport at Shamshabad, among other infrastructure plans. As the connectivity (through an outer ring road and an elevated express highway) to the airport improves, new development is expected around the city.

Cushman says that new growth corridors in the outer limits of the city have emerged in all the four regions: in north Hyderabad, these include Medchal Road, Alwal, Hakimpet, Kompally; in south, these are Shamshabad, Maheshwaram, Timmapur, and Mansapally; in east, Ghatkesar, Pocharam, Bongulur, and Cherlapally; while in west, the areas include Moinabad, Tellapur, Isnapur, Kokapet and Narsingi and Vattinagulapally.

Kukatpally, Miyapur, Gachibowli and Madhapur in the western parts of the city are expected to receive a majority of the residential supply by 2009-10. These regions are also likely to witness more gated communities and villas.

The Hyderabad Urban Development Authority is doing its bit to add to the housing boom. In a bid to decongest the city, it has proposed the development of 22 townships (five in the 1st phase) along the city’s Outer Ring Road through Public-Private Partnerships. These developments have attracted major developers like DLF, Unitech, K. Raheja Corporation, Mantri Developers, and Alliance Group to the city.

In the commercial space, Hyderabad is likely to witness office space supply of around 7 million sq. ft, including 3.7 million sq. ft of SEZs by 2008-end. Due to limited supply in the first half of 2008, pressure on rental and capital values is likely to remain. On the retail front, some 1.3 million sq. ft of space could enter the market, but that may not be enough to curb the rise in rentals at least until the end of 2008. Retailers in the city needn’t worry, though. Another 8.36 million sq. ft will be available by 2010.