Will the elections end the fence sitting in Hyderabad?
Apr 25, 2014
Source : The Times of India

 

HYDERABAD: With the general elections going on in the country, every state seems to be in a revival mode. People are up for a change and are looking for some fresh policies and reforms. Hyderabad goes for polling on 30th April. Despite being one of the best livability options in the country, uncertainty over the political factors took a toll on Hyderabad’s property market. Most of the buyers have become fence-sitters and have left the decision of buying a property on the election results and future potentials. Buyers are expecting the new government to set the mood right by waiving off uncertainty, while the builders are expecting a positive property trajectory by getting clearances for the unfinished and awaited projects.

Aju Thomas, president, Trinity Partners, says, “We feel that in past six months especially the residential market has started showing signs of improvement and has gradually kept improving. Post clearing of the bill, most developers have increased prices. Currently, some apartment projects in the suburbs are almost touching one crore price.” The industry depends on the new government to provide a hindrance-free operating environment and there is a sense of hope among the developers for a positive post-poll scenario. Srinivas Reddy, owner, Rajapushpa Properties, says, “It will take two to three months for people to react, absorb the functioning of both the governments and realise the worth of property in Hyderabad.”

Trivita Roy, AVP- Research and REIS, JLL India, explaining the post-election scenario, says, “There is a lot of optimism about the post-election scenario and most of the people feel that the new government will boost the business sentiments in the city. Pro-development policies are the need of the hour to boost investment in Hyderabad. The new government will have to work towards improving the brand value of Hyderabad which has got shadowed over last few years due to the political instability. However the real impact of the new government and their policies can be seen only after 9-12 months post elections.”

The word ‘uncertainty’ has been doing rounds from past few months and has become one of the factors for the property market to sustain. Hyderabad has been waiting for stable political environment for quite some time now and post -elections a stable government is likely to be established which will end the uncertainty. Thomas explains his view on the same, “We think fence-sitting is mostly by investors. Such investors first kept waiting for the central government’s decision and now are waiting for the election results. The end-users are already in the market buying ready to move in properties. The prices in this market are very attractive and offer a significant value proposition and opportunity for escalation.”

Not only have the residential properties, the commercial properties also saw an upward trend. In the same period, the commercial market has also showed signs of revival. Most of the operational projects in HITEC city have negligible percentage of vacancies. A few large leasing and sale transactions have also been completed in the HITEC city area. New companies are back looking at Hyderabad as an office location. Some companies that had closed their Hyderabad office earlier due to the ground situation then are also back in the market to restart operations.

According to a JLL report, Hyderabad and Kolkata saw better absorption levels than in 2013, but witnessed a sharp rise in mall supply that led to a rise in vacant stock. Hence, for the next three to four quarters, growth of rentals and capital values in retail will largely remain stagnant.

Fast fact

Pre- elections the real estate investment sentiments are lukewarm and there is not much activity in the Hyderabad real estate market. Investors are in a fence-sitting mode and are keeping a close watch at the market movements to take decisions accordingly.

How much is brand Hyderabad likely to suffer due to the partition of state and administration of two different governments? BVP Raju, an APRA Member and a consultant for Ghar4usolutions, says, “With respect to manufacturing industry, the possible jobs will move away from Hyderabad and industrial lands outside Telangana may show a steep rise. However, constructed real estate, mostly driven by IT sector will not suffer.” Srinivas Reddy seconds his view, “Brand Hyderabad won’t be affected even after the division of states. Hyderabad provides a third of the employment in the state. The brand wasn’t built in a day and for any other city to reach its level, it will take minimum of 10-15 years. In terms of livability, Hyderabad is in the league of cities such as New Delhi, Mumbai, Kolkata.”

Not only regular properties, buyers are also looking for unique concepts such as luxury townships. KV Rajnarayan, GM marketing, Ramky Estates’s Discovery City which won a global award in 2011 for its concept township design, says, “People are now looking at future potential of areas such as the ITIR and investing in projects which are lifestyle offerings, not just an individual home.”

Both the states will have new governments who ideally would be focused on developing their respective regions. Hyderabad is the cheapest city in the current state of Andhra Pradesh today. It
would gradually become the costliest city in terms of property prices and is likely to move on to compete with other metros in terms of pricing, launching of branded residential projects and further commercial projects.

However the fact remains that with the division of state, the Seemandhra region needs to be developed rapidly to accommodate the functional changes. Analysts feel that due to the previous lull in Hyderabad’s market, the markets of Vijaywada, Visakhapatnam, Nellore, Ongole etc. have seen good increases in property prices. Apart from Hyderabad and its suburbs, the new state capital city will see a lot of activity in the coming future. Some of the important tier-II cities within both the states are also likely see positive momentum.

Trivita Roy explains “There is a lot of inquisitiveness amongst people to know which town or city will be the new capital of Seemandhra. Based on this many cities in the coastal Andhra regions are witnessing immense speculation in property markets. They have witnessed significant increase in property prices and launch of new real estate projects due to this speculation. But until the new capital is declared it is very difficult to say which city will be getting maximum benefits. However, Visakhapatnam, Vijayawada and Tirupati are the only cities other than Hyderabad who have air connectivity. Therefore these cities are most likely to be in focus.”

So, sticking to the view that the property prices will show an upward trend what is the rate of appreciation one can expect? Srinivas Reddy says, “It is the right time to invest because once the elections are over, within a few months the prices in Hyderabad may appreciate by 15 to 20 per cent.”

“Both the states will complement each other based on their existing and upcoming infrastructure developments. However this depends on how proactive each of these state governments will be to attract investors in their respective states,” Trivita Roy summarises.

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