Hyderabad, the capital city of Telangana has exhibited exceptional resilience to the fall in property prices recently. The city’s robust real estate structure is supported by the IT hub and government initiatives that helped the city emerge strongly from the stalled activities due to lockdown.
The real estate reports by remarkable global real consultancies like JLL, Knight Frank have indicated growth in the market size. Let us get to the overview of the market that witnessed turbulent graphs in the past couple of years.
Hyderabad Real Estate Overview 2019
Hyderabad’s commercial market has witnessed tremendous growth despite the nationwide economic slowdown in 2019, a six-quarter decline in GDP which is the longest spell in 23 years of history. Amid the tough times, the office space sector had scaled up with 13.2 million sq. feet of supply and the highest ever net absorption of 10 million sq. ft. HiTech city and Gachibowli have contributed to the absorption of these office spaces. The annual supply was double the five-year-old average supply. This demonstrated the city markets’ potential. The expansion of the tech giants like Facebook, Microsoft, and Intel had spurred the demand. These growth indicators propelled the rental yields that appreciated by 9% year on year in the IT hub.
No less was the residential market, with the newly launched projects and successful sale history, the year was marked with positive market trends. The project launches increased by 63% year on year while the sales recorded an increase of 47% year on year. A 21% annual growth in sales was observed with a dip of 16% in the unsold inventory. This shot the capital as it appreciated by 9% year on year.
Source: JLL Report 2020
Hyderabad Real Estate Market 2020
Like all the cities, Hyderabad did experience a halt in the transactions and construction of the projects due to the lockdown. But the city bounced back with the sales recording a positive growth and the city held a share of 30% in the office spaces towards the end of the first half of 2020.
Hyderabad has a significant share of 18% in the country’s office space absorption. The city has the least unsold inventory among the leading cities’ markets in the country. This stands as a testimony to the strong sales that the city has witnessed.
Let us get to each of the markets in detail.
Office Real Estate
The city has resumed construction activities in the second half of the year due to the pandemic, around the month of June 2020. Hence, Hyderabad could add 3.7 million sq. ft in the first half of 2020 totaling the stock to 66.6 million sq. ft. The vacancy rate dropped to 9.2% with the absorption of 2.1 million sq. ft during the same period i.e., the first half of 2020.
Hyderabad’s office spaces almost have 30% pre-committed agreements in the next three years and these pre-committed agreements have seen the least fall-outs. This makes the market stable and prospective.
Residential Real Estate
The residential real estate, a utility and necessity sector, has seen the highest quarterly launches during the lockdown period and were concentrated in the northern and eastern submarkets. Though there were huge new launches, the unsold inventory also recorded a substantial sale that led to the lowest unsold inventory in the country. Hyderabad’s unsold inventory is estimated to take two years to sweep out.
Opportunities in the Challenges
The challenges brought by the pandemic have paved the way for the opportunities which make Hyderabad’s Real Estate industry prospective.
Hub and Spoke Model
This is the business model that can be used for the decentralization of businesses. The Look East Policy and the growth in dispersion are some of the government initiatives that are brought in support of this model. This lead to the expansion of the IT sector rather than being concentrated in some parts of the city which hampers the growth in the other parts of the city.
Urban Infrastructure Development in Fringe Areas
The urban infrastructure has to be developed and upgraded in order for the industries to spread and disperse. For instance, the companies allowed work from home during the pandemic ensuring the required infrastructure like continuous power supply and appropriate data connection. Hence the infrastructure development in fringe areas makes an impact on the IT companies to shift to the other parts of the city where the government intends to develop and grow in dispersion.
Development of Economic Base and New Economic Hubs
The state’s economy is dependent on the IT sector which accounts for approximately 65%. The state is planning to enhance other streams like Pharmaceuticals, Automobiles, Healthcare, etc to increase the business and ensure all-round development through diversification.
The markets of Hyderabad are expanding at a great pace as revealed by the office market. Hyderabad has the potential to go further supported by government initiatives. Hyderabad’s markets are independent as exhibited in the year 2019. This attracts global tech giants to establish their businesses and run profitably. This led to the tremendous change in the cityscape and the Real Estate markets.
Hyderabad Real Estate Market FAQ's:
Hyderabad Real Estate is exhibiting good resilience to the fall in property prices in challenging times like pandemic. The office space market and the residential market have shown an excellent performance in the previous years.
Hyderabad has various areas to invest in like Gachibowli, Hitech city, Kukatpally, Ameerpet. These are developing at a faster pace and due to the connectivity to the markets, these markets are high on demand.
Hyderabad has the optimal location and landscape that attracts companies to establish their businesses. The government initiatives also help the companies easily establish and run profitably.
The land prices in Hyderabad are increasing due to the influx of working professionals as the IT hub strengthens every year. The other sectors like automobiles and pharmaceuticals, retail are equally developing. This leads to the shoot up in the land prices.