Property prices will stay steady in Hyderabad: Knight Frank
Hyderabad: International property consultancy Knight Frank India is upbeat on Hyderabad real estate market. As per its recent report, about 24,797 residential units worth more than Rs 12,000 crore were registered in the city during the first four months of this year. The growing number of property registrations is a sign of positive sentiment among the buyers and sellers.
The city is also witnessing a renewed interest from all stakeholders, including investors and developers. In an exclusive interview with Bizz Buzz, Samson Arthur, Senior Branch Director - Hyderabad, Knight Frank India, attributed this to favourable socio-economics, well-developed infrastructure, relatively affordable prices and a business-friendly government.
How is the Hyderabad real estate market doing when compared to other cities in India? Why is it a preferred destination for home buyers and property investors from other states as well?
Since H1 2013, Hyderabad has been the only market among the eight cities under consideration that has not had a single year of price reduction. Despite pandemic-induced interruptions, this city is the only market that exhibited no year on year (YoY) change in price levels towards the end of 2020, demonstrating the underlying resilience of its residential market.
Hyderabad was the strongest performing residential market in 2021, with sales increasing by 142 per cent YoY to 24,312 units, the greatest in recorded history since 2011. Even in half-year terms, revenues increased by 135 per cent YoY in H2 of 2021. It is one of the most popular property investment destinations across India.
The city is witnessing homebuyer sentiments leaning towards ready-to-move-in homes or those nearing completion in order to reduce the construction execution risk. However, with the recent policy reforms and structural changes, the market dynamics have changed, and the sector has become more homebuyer-friendly.
Hyderabad been rated as one of the best city to live in for the next five years. The city also has an enabling infrastructure and is home to many marquee names such as Google, Apple, Microsoft, Uber, SalesForce, Micron, Qualcomm and several others.
Covid-19 seemed to be a blessing in disguise for the real estate sector with more sales and new launches in Hyderabad. However, there is a slowdown during the post pandemic period. Do you foresee a pick up in the real estate activity again in the city over the coming days?
During the pandemic period, the demand for housing across Telangana has seen an upward market trend. In line with the trend of buyers looking to upgrade to large homes due to factors such as work from home (WFH) and online studies, the residential units particularly in the 1,000-2,000-sft category have witnessed an upward trend and increased buyers' interest.
Historically, Hyderabad has had one of the strongest demand trends, withstanding external constraints such as the recent economic slump and inflation. While price increases caused by rising construction costs have had an impact on the more price sensitive categories, the upper segments have had a little influence, keeping the market strong and alive.
Factors such as job security, increased household incomes and savings, and lower home-loan rates will continue to drive stimulate demand for residential space in the future.
How is the impact of rising rates of raw materials on the real estate market? Do you anticipate any price corrections in Hyderabad properties in the near future?
While costs have risen in most places, Hyderabad is one of the few cities that have seen only a little increase. In Q1 2022, prices in the market climbed by a meagre 1 per cent on a quarterly and YoY basis. While no price adjustment is likely in the short term, prices in the Hyderabad market are projected to stay steady or climb somewhat in comparison to other major markets.
With the rising prices of residential properties across all zones of the city, do you think affordable houses are still available here?
The share of ticket size launches in the range of Rs 25 lakh to Rs 50 lakh stood at 18 per cent in Hyderabad during Q1 2022, which is higher than the average of 16 per cent observed in the previous year. Also, the share of sales in this price range remained stable at 20 per cent during Q1 2022, in line with the share of 20 per cent observed during last year.
Hyderabad is the only city which follows unlimited FSI. Is it a boon or bane to the real estate market? Do you see any long term repercussions?
As long as the infrastructure is enough to handle the city's forthcoming and ever-increasing expansion, unlimited FSI (floor space index) will have no effect. Otherwise, the city may face repercussions similar to those experienced by Mumbai and Bengaluru.
After the IT companies shifted to WFH mode, the demand for properties in tier-II cities of Telangana improved well. Is it likely to continue for more years?
Hyderabad's homeowner base is made up of a sizable Information Technology (IT) workforce that was generally untouched by pandemic-related interruptions. Indeed, the pandemic has sparked residential demand by limiting personal mobility and space for the greater part of the last two years, driving the people to seek more roomy and pleasant residential quarters.
Though the IT organisations, multi-national companies and other enterprises have begun to initiate work from office, it is not yet in full swing and with companies pursuing a hybrid model. This trend is projected to continue at least this year.
Telangana government has been focusing on infrastructure development beyond Hyderabad. Is there a scope for the real estate business to pick up across the State?
The State government has been focusing on development of infrastructure in Hyderabad and its surroundings to cater to its growing needs. With the government's continued focus on strengthening the service sector and IT sector at large, the real estate business is expected to pick up across the State.
The robust IT ecosystem and rich talent pool in Telangana attracts any company, making it the fastest growing State in the country.
As the RBI has hiked the repo rate recently, the banks slowly started increasing the home loan interest rates. What will be the impact of this on the housing industry?
The Reserve Bank of India (RBI) has announced an unscheduled repo rate hike of 40 basis points to 4.40 per cent in May, 2022. It is further expected to increase the rates during the year. As the rate hike will make home loans dearer, it will have an impact on the housing industry. In the long run, the sector as a whole is projected to absorb the impact of the same.
During the pandemic period, commercial real estate suffered serious setbacks. The office space segment is still facing lacklustre demand. When do you expect the revival of the commercial space market?
The commercial real estate boom will continue in Hyderabad. The Grade-A offices along with co-working spaces are witnessing a rise among corporates and businesses in the city. The market shows growing confidence in its real estate landscape, buoyed by record hiring, major expansion plans by global IT/ITeS and BFSI firms, and heightened physical occupancy levels.
The Hyderabad office market has stabilised in 2021, with transaction volumes matching the previous year's yearly total of 0.56 million square metres (60 lakh sft). Traditionally centred by the IT industry, the market has maintained a varied tenant base that has supported demand in a tough climate during H2 2021.
However, given the significant hiring in the IT industry since the outbreak of the pandemic, it is only a matter of time until its percentage of transactions returns to its longer-term norm.
In the recent past, there is an uptick in the segments like data centres, warehousing, co-working and co-living properties in Hyderabad. Will this trend be confined to the Western part of the city or will it spread to other regions also?
While the western section of the city will continue to lead, the southern and eastern parts of the city will also see development as infrastructure in those regions has been improving with more projects coming up in the recent past.
