Hyderabad realty sector to remain strong despite challenges
Mid-range, high-end housing demand drives the city’s residential market, says B Sunil Chandra Reddy, president, NAREDCO Telangana Chapter
NAREDCO Telangana (formerly TREDA) is a 27-year-old association that represents and coordinates the efforts of real estate developers in the state. It serves stakeholders by interacting with the government and policy-making authorities to develop and implement real estate-friendly policies and service delivery systems. NAREDCO Telangana has over 300 members, including some of the top names in the real estate industry. In an exclusive interview with Bizz Buzz, B Sunil Chandra Reddy, President of NAREDCO Telangana, shared his vision for the sector. He said that he wants to encourage growth through contributions to policy-making, the promotion of new technologies, and the promotion of primary demand
How is the real estate sector doing in Hyderabad?
Hyderabad continues to dominate the Indian real estate sector both in residential and office space. The city witnessed property registrations of 5,557 residential units in July 2023, notching up a rise of 26 per cent year-on-year (y-o-y) with total value of the registered properties during the month at Rs 2,878 crore, up 35 per cent y-o-y. As per the recent reports, the city has as much as 380 million sq ft of Grade A office space and an additional 41 million sq ft of under-construction office stock, which is expected to enter the market by the end of 2023. This Grade A office space holds the potential to be listed as the Real estate investment trusts (REITs).
What are the challenges and opportunities of the sector in the current scenario?
There are several challenges in the real estate sector post the recent slowdown from the pandemic. The challenges include surge in cost of construction materials, unavailability of land, insufficiency of funds, building a database, keeping up with technology, increasing competition, finding listings in the market and high dependency on physical workforce.
However, opportunities also exist in the real estate market. Hyderabad is expected to remain strong in the coming years, offering good opportunities for homebuyers who are looking for value-for-money properties. The city has been witnessing a significant surge in property rates.
According to a recent report, the city’s property rates have reached an astounding Rs 6,000 per sq ft, making it the second-highest in India. This staggering increase has caught the attention of real estate enthusiasts, investors, and potential homebuyers alike.
Among affordable, mid-range and luxury housing, which segment of the real estate sector is witnessing more demand these days?
Hyderabad’s residential market has shifted focus from affordable housing to mid-range and high-end homes. The city recorded the highest jump of 42 per cent in the average price of luxury housing units (ticket size of Rs 50 lakh and above) from Rs 7,450 per sq ft in 2018 to Rs 10,580 per sq ft in the first half of 2023.
Despite having the highest increase for luxury properties, the city’s current average price in this category is still the lowest among the top seven cities of the country at Rs 10,580 per sq ft in 2023; in the mid segment, it is approximately Rs 5,780 sq ft and in the affordable segment Rs 4,000 sq ft.
How are the infrastructural developments in and around Hyderabad supporting the real estate market in the city?
The effect of the Master plan of Hyderabad will be seen in the radial concentric structure of development with new urban nodes in all directions, to promote a balanced development. This being in line with present and future travel needs of the population and its activities.
The hub and spoke model is for the development of the peripheral areas. The Regional Ring Road (RRR) will see the development of Sangareddy and Zaheerabad (NIMS being set up in both towns). Also, it makes for the preferred residential location for people employed in industries at Patancheru.
Industrial Corridors being set up in Patancheru and Uppal are encouraging development in Sangareddy, Medchal, Bibinagar, Bhongiri, Uppal and Shahabad. This will ensure equitable growth of all regions in Telangana creating abundant job opportunities, and increase property values, leading to an increase in the real estate value in the city.
The infrastructure development continues to play a crucial role in boosting Hyderabad’s real estate market. The city’s rapid expansion in transportation, connectivity and technology has attracted more investors and homebuyers, resulting in a surge in property demand and prices.
With continued investment in infrastructure development, Hyderabad’s real estate market is set to thrive, making it a promising destination for both property buyers and investors. The city’s ever-growing infrastructure has seen immense growth in real estate demand and value.
After West Hyderabad, which part of the city is developing in a big way? What factors are contributing to its growth?
Though the western regions of Hyderabad continue to be the epicentre of growth in the city, the northern parts of the city too have been seeing significant traction due to the IT/ITeS, logistics, warehousing cluster, manufacturing clusters, pharma & healthcare clusters. This region also has a constant demand for residential and commercial real estate.
Having several advantages such as NH 44 connecting Hyderabad and Nagpur, rail connectivity, multi-speciality hospitals, international schools and entertainment zones, North Hyderabad will further improve connectivity and propel growth. The proposed metro rail and three elevated corridors will also improve traffic flow in this belt.
In an effort to make the north corridor at par with the west, the government has decided to set up the tallest IT Tower at Kandlakoya with a capacity to host 100 companies in the first phase and employ over 50,000 people. North Hyderabad will go on to become what West Hyderabad was a decade ago. The property prices will witness exponential growth.
What is the real estate forecast for Hyderabad for the next two years?
Despite soaring home loan rates in the recent past and challenging global economic conditions leading to layoffs in various corporate sectors, the housing market in Hyderabad has sustained its bullish trend this year. The city is likely to experience a surge in residential sales during the next couple of years.
While interest rate-sensitive segments of affordable housing have started witnessing some impact of the rate hikes implemented earlier, any further increase may have resulted in hitting the demand in this segment. Fortunately, the Reserve Bank of India's decision to hold the key rates is expected to support the housing market to maintain its pace in the sales.
With the success of e-commerce business in the rural areas, how is the warehousing and logistics segment developing in villages and towns of the State?
Shamshabad, Medchal and Patancheru are the key clusters that are seeing demand from the warehousing segment. Hyderabad saw 5.4 million sq ft transacted in FY22. This is 128 per cent more than 2.4 million sq ft taken during FY21. The growth is majorly driven by increased growth in the third party logistics (3PL) providers.
Mangalapally Logistics Park is a world class facility spread over 22 acres and the first integrated logistics park in India developed in PPP mode ready for commercial operations. The State government is also developing a first-of-its-kind logistics park at Batasingaram in Hyderabad on 40 acre with an investment of Rs 50 crore with warehousing facilities.
The logistics policy of the State government is designed to enable the creation of 10-12 more logistic parks in the next two-three years to make it a global logistics hub. Ease of doing business, proposed Pharma City, and TS-iPASS would benefit Telangana in scaling up in the sector and in three years, the State could see five times growth.
Government of Telangana is planning to develop a Dry Port Facility in Nalgonda District. It will have a strategic location to act as a hub of economic activity with multi-modal connectivity to the nearest ports in Andhra Pradesh and Tamilnadu. This would be a state-of-the-art facility in Public Private Partnership (PPP) model.
How is the impact of the IT parks established by the state government in tier-2 cities of Telangana? Beyond Hyderabad, which cities are seeing real estate growth in the State?
Telangana government has constructed IT towers in Warangal, Karimnagar, Khammam, Siddipet, and Mahabubnagar districts to provide employment opportunities to local youth. These tier-2 cities are emerging as major growth drivers due to government initiatives. An IT tower is newly-constructed in Divitipalli at a cost of Rs 40 crore on a four-acre campus.
The State government has taken up the construction of IT projects to expand the sector to tier-2 cities in the State. The IT hubs in Warangal, Khammam and Karimnagar have already been set up and are running successfully. The Nizamabad and Mahbubnagar IT Hubs have been inaugurated recently. This will support real estate growth in the surrounding areas.