Hyderabad realty will continue growth trajectory for next 5 years
Andhra Pradesh’s capital city issue is also helping the Hyderabad realty, says Ark Group’s Ram Reddy
WHEN the Covid crisis engulfed India in March last year and the country was under total lockdown, real estate developers and others connected with the key sector in Hyderabad feared that the slump in property transactions would continue for over a year, crippling their operations. But the realty sector in Hyderabad came back with a bang, much faster than many expected. "Sales are now back to the pre-Covid levels. The inherent strengths of Hyderabad such as good infrastructure, lower property prices compared to other cities, and increased investments into the city in the IT and other sectors, helped the rebound in the real estate. The growth trajectory of Hyderabad real estate will continue for another five to six years. That's for sure," Gummi Ram Reddy, Chairman of Credai Telangana and Chairman and Managing Director, Ark Group, tells Bizz Buzz in an exclusive interview.
How the real estate sector is doing in Hyderabad now?
Hyderabad is now the best place for the real estate investment in the entire country. For that matter, it can be said that not only Hyderabad, the entire Telangana is the best place. The Hyderabad realty bucked the countrywide trend of slowdown even during the Covid crisis and bounced back with a jet speed. Of course, we faced challenges for a couple of months initially, but the key sector in the city returned to pre-Covid levels now. Sales have been good for the past three months. We are back to normalcy.
Did you expect such a fast turnaround back in April last year when India was under total lockdown?
Though some people said that the Covid-induced crisis would last for a couple of years, I expected a turnaround after March this year. But the rebound in the Hyderabad realty happened much faster than anyone anticipated. Lots of new projects will be launched now as there is a big buoyancy in the market. The residential segment is really taking off in a big way.
Can you list out a few reasons for the sudden turnaround?
The confidence level on the Hyderabad real estate has gone up tremendously when we compare it with other cities. Prices are comparatively less in Hyderabad when we construct a multi-storeyed building. Though the price gap is closing between Bengaluru and Hyderabad, housing prices in Hyderabad are still cheaper by 15-20 per cent than those prevailing in Bengaluru. This is primarily so because there is no limit on FSI (Floor Space Index) in Telangana. Therefore, there is a pricing advantage for developers as well as buyers. If the same building is constructed in other cities, the final cost will be much higher. Moreover, Hyderabad has a better infrastructure and is also considered a safe city on all fronts. Barring recent floods, Hyderabad has not seen any natural calamities in recent years. It's a cosmopolitan city as well. The State government is very proactive and has launched the Telangana State Building Permission Approval Self-certification System (TS-bPASS) which has eased the compliance burden on the sector. And investments are pouring in from all over the world. All these factors are fueling the growth of the real estate sector in the city.
Prices of steel and other construction materials have gone up considerably. Is there any rise in housing prices?
It's true that the construction cost has gone up steeply. Steel prices went up by almost 50 per cent. Cement prices also skyrocketed. All other building materials became costlier too. Added to that, labour cost also went up. As result, the construction cost had gone up by around Rs 300 per square foot. As most of the developers in Hyderabad opt for joint development with the landowner, the overall construction cost has gone up by Rs 500 to Rs 600 per sft. As developers can't absorb the entire price escalation, they have increased apartment prices by Rs 300 to Rs 400 per sft. In the case of villas, the price increase has been around Rs 1,000 per sft. The land cost has also increased enormously. This will have a cascading impact on future projects.
Why the land prices are going up in Hyderabad and other parts of Telangana?
When there is a positive sentiment in the market, people will simply buy properties. They don't even think about why there is positive sentiment and how long will it last. That's what is called the boom time in the real estate sector. We are at that point now. For instance, our share market is going up and up. That's happening at a time when the economy battered by the Covid crisis is in a negative zone. There is no answer if you ask someone as to why the stock market is going up. It's the same with real estate. But property is the safest investment and offers decent returns in the long run. There may be some price fluctuations in the short-term, but real estate is the best bet on a five-six year horizon. The primary reason for the price appreciation is that while the population rises continuously, the land remains the same. Moreover, everyone needs a house of her or his own. With the harrowing experience of the Covid-19, people are looking for bigger houses now.
There is a tendency now that people living in rural areas are selling their agricultural lands in villages and buying properties in Hyderabad. Why is it so?
There are two distinct trends here. People living in urban areas are buying farmlands as there is some assured income in the form of Rythu Bandhu. Work from home and a desire for privacy triggered by Covid pandemic have also led to increase in demand for lands. This trend has led to rise in the prices of agricultural lands across Telangana. In some areas, there is a five-fold jump in the prices from Rs 5 lakh to Rs 20 lakh for an acre. The increase in irrigation water facilities also fueled a rise in land prices in rural areas. To cash in on this windfall, people are selling lands in villages and buying properties in Hyderabad.
How long will this growth cycle of Hyderabad real estate continue?
This cycle in Hyderabad will continue for the next five to six years. There should not be any doubt about it. Furthermore, India's image has improved globally in recent times. For a variety of reasons, India as a country could handle the Covid pandemic better. For some reason, Indians exhibited better immunity against the deadly disease. We are lucky that way. While people are still dying in some countries, we are back to normal now. Moreover, the world is looking at India as an alternative to China as Covid has damaged the image of the communist country. All these factors will help Hyderabad real estate besides the factors I mentioned earlier.
There is a view that the delay in the development of a capital city in Andhra Pradesh is also helping the Hyderabad realty as people from AP are investing here. How far is this true?
Yes, the AP capital issue is also helping. The then AP government created an unprecedented hype over the Amavarati Greenfield capital. Believing the hype, many people bought properties there. Several developers also launched their projects closer to Amaravati. But all these investments got stuck now as the YSRCP government announced three capitals' plan. In this backdrop, people from the neighbouring State are investing in Hyderabad as they lost hope there. Further, Hyderabad has become the safest place for real estate investments. Of course, some cities in AP are doing well. But real estate investors always look for a safer bet.