How Hyderabad Manages To Defy Reality In Times Of Despair
The mood of gloom has been ubiquitous. As it is, India’s real estate sector started showing signs of distress beginning of 2014. The government's move to ban notes of high-value denominations in November 2016 came as a bolt from the blue and made it much worse, demonetisation’s stated long-term benefits notwithstanding. Since then, key property markets across the country are struggling to overcome the pain and function normally. Not many of them have been able to attain that goal so far as real estate developers try to cope with new laws and financial crunch, all at the same time.
In this overall mood of despair, one can hardly miss the resilience Hyderabad real estate has managed to show, continuously and consistently.
Data available with PropTiger.com show property prices in Hyderabad increased 14 per cent in the fourth quarter of the financial year 2019 on a year-on-year basis. This happened at a time when rates either fell or increased only mildly in other major cities.
While overall home sales fell five per cent in the March quarter when compared to the corresponding quarter in FY18, home sales in Hyderabad increased 26 per cent, the highest seen by any city during the period.
Inventory overhang was also the lowest in Hyderabad – it would take developers 17 months to sell their existing housing stock in Hyderabad. Now, compare this with the inventory overhang in Ahmedabad. Builders will require 40 months and no less to sell the existing unit stock in this affordable market – one has to pay an average Rs 2,825 to buy a square foot of space in Ahmedabad; at Rs 4,900 the same space in Hyderabad is comparatively high.
Mind you, rates have consistently been rising in Hyderabad, which has featured in Knight Frank’s list of global cities where rates have seen an upwards movement despite a correction in several of the world’s major property markets.
The obvious question now is, what possibly keeps Hyderabad realty afloat at a time when other cities are struggling to shake off a slowdown?
Could it be the affordability?
Not every real estate hotshot has the luxury to afford price increase. In India’s 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 southern cities of Chennai and Bengaluru, the poll, however, forecasts a price rise of 2-3 per cent this and the following year.
The 14 per cent increase in property rates in Hyderabad could be explained by pegging our story on its affordability at a time when excessively overvalued markets in India are on their way down, rate-wise.
Despite the fact that there has been a consistent rise in prices, property in Hyderabad is still affordable when compared to its southern counterparts.
Composite assessment price of the property in both Chennai and Bengaluru is Rs 6,900 psf, shows the National Housing Bank’s Residex, while it is Rs 4,500 in the City of Nizams.
If we compare the prices with overvalued markets of Delhi and Mumbai, Hyderabad is an investor’s delight. Composite assessment price of property in Mumbai Rs 23,400 psf in Mumbai and Rs 9,700 psf in Delhi shows the Residex.
This presents the perfect opportunity for buyers. With its current ever-rising-still-affordable pricing scenario, Hyderabad allows buyers/investors the liberty to invest in its luxury housing market. For the same amount, they can afford only a decent home in a bigger city. The fact that rates will continue to grow in future also acts as a great incentive for investors to park their money in Hyderabad.
Could it be the developing infra?
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 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, the government has also allocated Rs 5,500 crore 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 Lok Sabha elections.
Only last year, the government set aside Rs 45,000 crore to make small but significant changes in the city infrastructure. The money would be used over the three years for building skywalks, flyovers, underground cabling, stormwater drains and development of green spaces across Hyderabad.
Could it be the feel-good factor?
The growing popularity of the city could be also be explained by the fact that is one of the best places in India as far as the quality of life goes. Those who don’t find monetary incentives attractive enough come to Hyderabad to enjoy that.
Mercer’s Quality of Living survey ranks Hyderabad 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.