Even as other metro cities witnessed a slump in real estate transactions, Hyderabad registered steady growth in Jul-Sep 2019, too, on the back of numerous ongoing infrastructure projects, political stability, and policy reforms. Private Equity investments in the city went north by more than five times over the last 4-5 years, which have resulted in around a 10 percent increase in residential project launches, YoY. More than half of the total residential demand in the city was captured for apartments priced within Rs 40 lakh. The luxury housing category reported oversupply against subdued demand.
A healthy jump in the absorption of office spaces, primarily driven by the growth in the BFSI and IT/ITeS sectors, pushed the housing demand up in the city, exponentially. In H1 2019, office space leasing quadrupled compared to the leasing activity reported during the same period in 2018.
The annual commercial leasing in Hyderabad has touched 9 million sq ft now. Subsequently, new residential launches have risen, too, to cater to the migrant workforce coming into the city. Planned infrastructure projects such as metro expansion, the Outer Ring Road (ORR), and a high-speed metro project connecting Hyderabad airport to Raidurg have directed investor interest towards large-scale residential projects across the city.
Hyderabad’s housing market continued to register growth with a two percent uptick in capital prices, QoQ. State initiatives such as single-window clearance for building permits and introduction of a penalty clause for officials delaying legitimate building projects benefitted the city’s realty landscape. The proposal to establish new IT parks to decongest Madhapur and Gachibowli, and the proposed metro corridor to airport drove buyers to the southern locales of Rajendranagar, Attapur, Kismatpur and Budwel.
Developers eyed the eastern and northern quadrants of the city. Resultantly, Uppal and a few other eastern locales, emerged as the realtors’ best bets. Here, the average property prices have almost doubled in the last 7-8 years. Property prices in LB Nagar jumped up to 10 percent, YoY. Commencement of metro services and several IT companies in Pocharam, Medchal, Keesara, and Shamirpet fuelled residential demand and housing deals. As a result, land prices in some micro-markets of East Hyderabad doubled in the last one year. For instance, land rates in Kompally reached Rs 26 crore per acre this year, which were pegged at Rs 12 crore earlier.
The 158 km-long Outer Ring Road (ORR) acted as a catalyst of development by aiding the expansion of the city. The network triggered residential development in localities such as Adibhatla, Ibrahimpatnam, Pedda Amberpet, Patancheru, Ghatkesar, Gundlapochampally and Kompally. The city recorded an average rental appreciation of three percent, QoQ. Areas in proximity to IT hubs such as Miyapur, Madhapur, Ameerpet, Kondapur, HITEC City and Gachibowli posted a five percent growth, YoY.
Backed by robust office leasing activities and sound infrastructure plan, Hyderabad is expected to continue dominating the realty charts in the ensuing quarters, too. Extension of the Ameerpet-HITEC City metro corridor to Raidurg, and the Outer Ring Road project have the full potential to stir up residential and industrial growth in the city. Notably, Hyderabad faces a wide demand-supply disequilibrium, especially for houses priced within Rs 60 lakh. With the launch of just 53 new housing projects in the studied quarter as against 77 in Apr-Jun 2019, the gap is expected to further widen unless the developer community adopts “right price-right size” strategy to plan their launches.