Hyderabad's commercial realty at standstill

Samson Arthur, Branch Director-Hyd, Knight Frank India
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Samson Arthur, Branch Director-Hyd, Knight Frank India

Highlights

Knight Frank report reveals zero office space absorption during April-June; residential sales at a decade low as Covid-19 takes its toll

In a biggest jolt to the Hyderabad real estate sector which came back with a bang post the formation of Telangana State, office space transactions came to a standstill during April-June period as Covid-19 pandemic triggered by Chinese-born novel coronavirus stung the sector beyond the imagination.

As per the 'India Real Estate' report for January-June 2020 released by property consultancy Knight Frank India, Hyderabad saw 'zero' office space transactions in the last three months (April-June 2020) against 0.94 million office space consumed in the same three month period in 2019. The fall in office space consumption started during January-March 2020 itself when office space absorption declined 25 per cent to 2.18 million sft from 2.19 million sft a year ago. In the last six months, the office space absorption fell by 43 per cent in Hyderabad.

While co-working and other services sector took the maximum hit with a decline of 74 per cent and 98 per cent respectively, absorption by the IT sector increased by 11 per cent during January-June period. However, most of that absorption in the IT sector happened during January-March as the following three months did not see any transactions. Further, there was some slowdown in rental growth as well. "Covid pandemic has obviously impacted office space absorption in the last six months. As a consequence, even pre-commitment deals came under pause mode. However, we can expect some traction during July-September as some deals are in pipeline," Samson Arthur, Branch Director-Hyderabad, Knight Frank India.

Residential sales also hit a decade low in the city as prospective buyers deferred purchases in the wake of uncertainty haunting the country's economy and job market, revealed the report. Sales during April-June period nosedived by a whopping 76 per cent to 974 units from 4,141 units in the same three month period a year ago. Sales also saw a decline of nine per cent to 3,808 units during January-March 2020 from 4,193 units a year ago. Covid crisis also took a toll on new launches which saw 46 per cent decline in the last six months.

But there is a bright ray of hope though. Housing prices have not gone down in the City of Pearl as witnessed in the other major metros like Mumbai and Delhi during this unprecedented health crisis which is throwing global economies out of gear. That means Hyderabad's realty is still on a strong footing and positive sentiment is still in the air.

In the six months to June 2020 (H12020), housing prices in Hyderabad appreciated by seven per cent! Bengaluru is the only other metro where a similar trend was noticed as the home to India's silicon valley witnessed a four per cent jump in housing prices this year. However, housing prices in Hyderabad remained flat during April-June quarter when the country was mostly in lockdown mode. "Low inventory levels, strong balance sheets of developers and lower prices compared to other metros worked in Hyderabad's favour when it came to housing prices. This trend may continue. But it depends on how long the Covid-induced crisis lasts," said Arthur. According to him, due to Covid crisis, real estate projects which are currently under execution in the city will get delayed by three to six months.

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