Hyderabad Real Estate Market’s Trend-Defying Growth
The slowdown in the real estate market that goes all the way back to 2014, doesn’t show signs of a turnaround yet. In such a slow market however, Hyderabad has continued to show steady growth and surprised many an analyst.
Price trends in Hyderabad real estate market
Data available with PropTiger.com show that property prices in Hyderabad increased 17 per cent in Q1, FY20 on a year-on-year (y-o-y) basis. This happened at a time when rates either fell or increased only marginally in other major cities.
If overall home sales in India’s nine key property markets fell 11 per cent in the quarter ending June, 2019 on a y-o-y basis, Hyderabad defied the trend by clocking a 10 per cent increase in sales. As a result of this, inventory overhang in the city declined by 42 per cent in the past one year, the highest seen in a city during the June quarter, this year.
Developers thought it only prudent to hold on in terms of new launches, with them falling at an annual rate of 56 per cent. Inventory overhang was also the lowest in Hyderabad – it would take developers 15 months to sell their existing housing stock in Hyderabad. Now, compare this with the inventory overhang in Noida. Builders will require 41 months to sell the existing unit stock in this affordable market. Also note that Hyderabad has the best inventory profile among the nine cities ─ it has the lowest age as overhang.
Price wise, while one has to pay an average Rs 3,900 to buy a square foot of space in Ahmedabad; at Rs 5,200 the same space in Hyderabad costs comparatively more. The obvious question now is, what keeps Hyderabad realty afloat at a time when other cities are struggling to shake off a slowdown?
Affordability works in favour of Hyderabad real estate
Not every realty hotspot has the luxury to afford price increase. In the national capital Delhi, for instance, which has been ranked as ‘overvalued’ in a Reuters poll, property prices are predicted to fall two per cent this year. The poll, in fact, says rates across the country would ‘barely rise this year, after nearly tripling in the past decade and rising for many years at a double-digit rate.’
For the southern cities of Chennai and Bengaluru, the poll, however, forecasts a price rise of 2-3 per cent this and the following year. In such a scenario, the 17 per cent increase in property rates in Hyderabad could be attributed to its affordability at a time when excessively overvalued markets in India are on their way down, rate-wise.
A composite assessment price of the property in both, Chennai and Bengaluru is Rs 6,900 psf as per the National Housing Bank’s Residex, while it is Rs 4,500 in the City of Nizams. Comparing the prices with the overvalued markets of Delhi and Mumbai, gives Hyderabad a distinct advantage since the composite assessment price of property in Mumbai is Rs 23,400 psf and Rs 9,700 psf in Delhi, as per the Residex.
Hyderabad’s infra growth adds to its real estate
Prodding the price growth in just the right amount in Hyderabad are infrastructural factors. Investors will continue betting on Hyderabad realty simply for the fact that there are planned infrastructural developments. The Hyderabad Metro rail project has certainly acted as a game-changer. With a 56-km operational stretch, the Hyderabad Metro has become India's second-largest Metro Rail network, next only to Delhi. As it expands its network in the city (the Hyderabad Metro is likely to carry as many as 22 million passengers in a day by 2024), it would work its magic on emerging localities, too. While the actual values of property in such areas have begun to grow, their rental value would appreciate as soon as they get an operational Metro link.
To ease traffic conditions within and around the city and to curb pollution, the government has allocated Rs 5,500 crores for building a 363-km regional ring road (RRR) in Hyderabad. Work on the project that would strengthen the highways connectivity here is likely to start after the central government approves the plan.
Only last year, the government set aside Rs 45,000 crores to make small, but significant changes in the city’s infrastructure. The money will be used over three years for building skywalks, flyovers, underground cabling, storm water drains and development of green spaces across Hyderabad.
Quality of life in Hyderabad
The growing popularity of the city could also be explained by the fact that quality of life in Hyderabad is one of the best in India. The Mercer’s Quality of Living survey ranks Hyderabad as the best city to live in India – Hyderabad’s global ranking is 143.In the local survey also, Hyderabad has been ranked as the 27th best city to live in India. In the government’s clean city survey 2019, Greater Hyderabad is ranked 35th. Also, according to a report by IQAir AirVisual, Hyderabad is comparatively cleaner than most mega cities in India.