Hyderabad realty yet to find takers - TeluguPeople.com News

HYDERABAD: Political stability has returned to Hyderabad after the bifurcation of erstwhile Andhra Pradesh State and formation of two popularly-elected governments in both Telangana and AP in June this year. But uncertainty still looms large over the real estate sector, particularly residential segment, in and around the capital city.

In the last few months, Hyderabad has witnessed a series of property shows held by real estate developers and their associations to attract buyers, but there have hardly been any major sales of residential houses, villas and plots notwithstanding attractive incentives offered by the developers.

Several realtors had been actively taking part in property shows to showcase their projects hoping to sell their unsold stock. While the buyers, especially from middle class segment, have been adopting 'wait and watch' approach hoping to see a fall in the price, real estate developers have been refusing to scale down the prices as they had made huge investments in the residential projects which were locked up due to low demand for the last couple of years.

On the other hand, the bifurcation of AP has resulted in potential investors, high net-worth individual and NRIs, who are mostly from Andhra Pradesh, looking up the new capital of their home State for their future investment opportunities in real estate sector.

As a result, several residential projects remain either unfinished or unoccupied. According to sources, there could be stagnation in sales for another 18 months to two years, if things would not improve.

Despite the low prices compared to nearby realty investment hubs such as Bangalore and Chennai, and quality infrastructure, demand for residential units in the city from investors totally dried up.

Most of the demand for residential units in Hyderabad was from end-users during the past four years. As developers were already troubled by the increasing cost of capital, there were fewer construction projects launched. Only mid and affordable segment projects witnessed good sales.

Another reason for the decrease in sales was the demand and supply mismatch. While the latent demand in the city for housing remained in the mid and affordable segments, the projects launched did not match the affordability level of potential buyers.

Sandip Patnaik, managing director, Hyderabad, Jones Lang LaSalle India, said, 'Bangalore, NCR, Mumbai, Pune and Chennai saw growth in office space which has resultant effect on residential space.

Post 2009, not many new companies have entered into Hyderabad though existing companies did expand to certain extent. Unless new companies come, there will not be surge in residential space. Majority of developers will now start launching new residential projects which hasn't happened for some time.

In next two quarters, there could be some improvement.' He added, 'Not many residential launches have happened in the last two years. Whatever occupancy is seen in residential space, those properties had been launched much before. In the first and second quarters of 2015, new launches can be witnessed.

Roughly, about 4,000 to 5,000 residential units exist at Hyderabad unsold, at present.' A source who didn't want to be identified, said, 'It is the apprehension of investors on their buying decision than the political instability that resulted in the fall of realty in Hyderabad since 2009.

Bangalore should have been more affected in realty terms, as Karnataka saw a comparatively unstable political climate with successive governments spending less than five years at office.

Yet Bangalore saw growth in all segments of realty.' P Dasharath Reddy, president, Treda, said, 'With political stability in place, residential realty will pick up in 6-8 months. The realty rates had been gradually increasing at a rate of 5 per cent depending on the developer, location and the project.

Of the overall investments happening in Hyderabad realty, over 50 per cent of the developer's investments had been happening in residential, while retail realty attracted about 15 per cent investments and the remaining 35 per cent investments went into commercial/office space, IT SEZs etc.'

Developers are entering joint development agreements with landlords to capitalise on the current low property valuations. Capital values, which remained stable for a long time, have slowly started increasing as new launches have been at prices higher than the market average because of the increased cost of capital, construction, marketing and other miscellaneous costs, points, a latest report by Telangana Real Estate Developers' Association (Treda) and JLL India.

This report also projects Hyderabad would require about seven lakh houses by 2022. Other issues are that some developers are not keeping their promises of amenities while they are delivering flats,' Madhusudhan Reddy, a software engineer from Kukatpally Housing Board, Hyderabad, said.