#DemonetisationAnniversary: Hyderabad realty stays strong against multiple market distractions

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Demonetisation story Hyderabad

The surprise ban on Rs 500 and 1000 currency notes on November 8, 2016 came as a shock for several cash-dependent businesses, the real estate sector in particular. Real estate markets of metro cities that were already plagued with a snowballing inventory overhang were further put under pressure as cashless homebuyers held back their purchase decisions. While inventory-laden metro cities such as Mumbai and Delhi NCR were majorly impacted by the note ban move, end-user driven Hyderabad exhibited resilience on the back of affordability and expanding IT presence.

While demonetisation impacted Hyderabad’s property market in the short run, the immediate effect of the same was not visible in Q3 2016 due to robust sales during the festive month of October. The city also saw a number of new launches during the festive season. The western quadrant along with the areas close to the employment hubs such as HITEC City, Kukatpally, Madhapur and Chandanagar witnessed healthy traction compared to Q2 2016 due to lucrative offers rolled out by the developers. Seamless connectivity, developed infrastructure and availability of affordable residential options were other factors that propelled growth in these regions. Average weighted property ‘asks’ for both society apartments and builder floors in both resale and primary market did not see any major dips post demonetisation.

Despite positive provincial factors listed above, land transactions were severely hit post demonetisation due to cash crunch in the market. The segment remained sluggish for quarters only to witness another blow in the form of the massive Miyapur land scam. This further disrupted land deals across the city adding to the market woes. Investors, too, showed no interest in such deals, which resulted in ‘ask’ rates of residential plots remaining subdued across the city.

In H1 2017, new launches in Hyderabad dropped by over 50 percent compared to H1 last year, hitting an all-time low at just over 2,500 units. This helped the city bridge the nominal demand-supply mismatch. Shrinking supply, inherent demand from natives and growing migrant population helped the city record some hike in property prices in all quarters post the currency ban move. In fact, Hyderabad emerged as the only metro to have registered growth in property ‘asks’ in the last one year.

The rental market of the city flourished, too, on the back of growing office space occupancy. Areas close to the IT hubs such as Manikonda, Nizampet and Banjara Hills witnessed healthy traction from the tenant community, translating into increased rental ‘asks’. When the city faced RERA and GST, a portion of prospective homebuyers held back their purchase decisions for mid-to-short-term further benefitting the rental market of these localities, resulting in an upswing in rental ‘asks’, YoY.

Thus, despite the cumulative effect of demonetisation, RERA and GST, Hyderabad’s end-user driven market helped it sustain the harsh repercussions of these reforms, unlike other cities.

Market Analysis

Hyderabad Story_demonetisation

Impact of Demonetisation

Primary Residential Market

Despite a slew of new launches in the festive month of October 2016, fresh inventory across the city was severely hit in the quarters following demonetisation. Developers discontinued ongoing projects and postponed new launches to counter liquidity crunch, which led to a drop of 10 percent in the supply of under-construction inventory in the market (Jul-Sep’17 vs Jul-Sep’16). Demand for under-construction projects remained subdued in the city on the back of growing interest for ready homes. With GST sparing ready properties, their popularity increased further. This hurt the under-construction primary market, too.

Despite this, price points for the primary housing market in Hyderabad did not witness any steep fall as developers refrained from offering any discounts on their launch prices. In some cases, popular developers even increased ‘asks’ on the back of market goodwill and sound track record.

 

NJ Quote

 

Secondary Residential Market

Despite currency ban, Hyderabad received a sturdy demand for ready homes. While most homebuyers stalled their buying decisions and adopted the ‘wait and watch’ approach, sellers, too, held back their properties and instead opted to rent it out till the market stabilised. However, in Jul-Sep 2017, homeowners entered into the market in the hope of liquidating their real estate assets, which resulted in supply overweighing demand, especially in luxury budget segment.

Post the implementation of RERA, the city saw an upsurge in enquiries, specifically in the high-income and luxury segment on account of improved buyer confidence.

West Hyderabad’s capital market continued to do well with areas such as Banjara Hills posting a six percent growth, QoQ, owing to its strategic location, proximity to IT hub and established social infrastructure. Newly emerging peripheral pockets of Pragati Nagar, Appa Junction and LB Nagar too, received healthy traction from end-users on the back of affordability, sound connectivity and proximity to employment hubs. Despite this, not many enquiries could translate into sales thus, extending the home buying cycle to 6-8 months.

Average weighted ‘ask’ prices of resale properties in Hyderabad went north, though inch by inch, in the last one year.

Locality

Current ‘ask’ rates*

Capital Growth**

Growth Drivers

Gachibowli

4400

-4%

  • Excess residential stock hampering price appreciation

Kukatpally

4250

6%

  • Proximity to IT hubs
  • Seamless connectivity
  • Developed social infrastructure

Hitec City

5340

5%

  • Prime location with limited inventory

Banjara Hills

7300

1%

  • Proximity to IT hubs
  • Seamless connectivity
  • Developed social infrastructure

Manikonda

3250

5%

  • Comparative affordability to neighbouring locales driving buyer demand

* Current ‘asks’ are median rates for listings in the respective localities posted on 99acres.com in Jul-Sep 2017 – both resale and new projects

**Capital growth is calculated basis the changes in average weighted ‘asks’, YoY – Jul-Sep 2016 vs. Jul-Sep 2017

Rental market

Hyderabad’s rental market is largely dependent on the migrant population and is unhampered by the market disturbances. The city posted a five percent increase in average rental values in Jul-Sep 2017 compared to the corresponding quarter of the previous year.

The prominent localities in the western part of the city such as Manikonda, Nizampet and Banjara Hills noticed maximum leasing activities. Prospective homebuyers forestalling their buying decisions, resulted in 10-13 percent hike in rental ‘asks’, YoY in these localities.

Demonetisation rental graph Hyderabad

National Outlook

National Outlook_Demonetisation

In Hyderabad, the market sentiment did not dampen due to the demonetisation drive as compared to other major cities across country. The realty sector in the city has remained stable with considerate housing demand. However, the city has witnessed a substantial dip in new launches on the back of RERA and GST implementation. Although, buying cycle has extended, sales volume is anticipated to pick up in the ensuing quarters.

Expert Opinion

By Ashish R Puravankara, MD, Puravankara Ltd

By Niranjan Hiranandani, Founder & CMD, Hiranandani Communities

By Aaron Solomon, Partner, Solomon & Co

By Saurabh Jindal, JMD, SVP Group

By Sanjay Jain, Group Managing Director, Siddha Group

By Arjunpreet Singh Sahni, Executive Director, Solitaire Group

By Pankaj Kumar Jain, MD, KW Group

By Mukund Patel, MD, Rutu Group

By Shishir Baijal, Chairman & MD, Knight Frank India

By Manju Yagnik, Vice-Chairperson, Nahar Group

By Aashiesh Agarwaal, Founder & Managing Partner, Pinakin Advisors LLP

By Anuj Puri, Chairman, ANAROCK Property Consultants


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  • Comments
  • YAGNA NARAYANA November 8, 20179:29 pm

    good information about hyderabad market

    Reply
  • B R SURI November 12, 20175:58 pm

    Informative

    Reply
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