The month-long agitation for a separate state of Telangana has impacted the overall sales volumes of the real estate business in the twin cities of Hyderabad and Secunderabad and surroundings areas.
The ongoing agitation is often tending to slowdown the decision-making process of buyers, as they feel there could be potential for further downside in prices if a separate Telangana is carved out of Andhra Pradesh.
But the fact remains that prices cannot go down any further as they have hit their lows and input and labour costs have gone up. Therefore, chances of prices falling further are bleak, a spokesperson of Andhra Pradesh Real Estate Developers Association (APREDA) said.
Various real estate bodies, such as APREDA, Builders Forum, and the Confederation of Real Estate Developers' Associations of India (CREDAI) arm here, are all of the view that the best thing for the real estate sector, or for that matter the rapidly growing Hyderabad metropolis, would be to remove the uncertainty regarding the issue of creation of separate Statehood.
It doesn't matter if a separate State is carved out or there in no decision regarding that. But it will certainly impact business and buyers' sentiment if this uncertainty continues. It is on for several years now. They tend to postpone the decision when they are unsure of the outcome. Regardless of if Hyderabad is made a separate territory or is part of AP or Telangana, investments would come in, they believe, refraining to get into further conversation on this politically-sensitive issue.
However, the festive season spark beginning from Dussehra right up to Deepavali festive season, when people tend to buy homes, cars and electronic items and generally splurge, is relatively less.
FAVOURED DESTINATION
Just when things were looking up for the real estate sector, with some of the property developers jacking up prices by Rs 50 to Rs 200 per square feet, after a prolonged subdued phase, the agitation has impacted the overall business sentiment and also that of the buyers, according to a cross-section of real estate players.
But most people believe that Hyderabad will remain a favoured destination for investments for its various unique attributes — be it the new international airport, the rapidly-growing urban infrastructure, satellite townships, cosmopolitan lifestyle and culture, and large employable talent pool for the services sector, according to representatives of APREDA.
The President of APREDA, Mr Prem Kumar, said prices have bottomed out, but input costs have gone up significantly. We don't see much downside from here. On the contrary, prices could firm up. Therefore for buyers, who are keen to acquire a property, there should be no reason to postpone.
The Chairman of Manjeera Group, Mr G. Yoganand, said, “The real estate market overall is hard but there continues to be a demand for well-designed and attractively-priced properties, be it villas, apartments or commercial establishments. The demand is there, but due to uncertainty, people tend to delay decisions. We are passing through this phase temporarily.”
Hyderabad is basically a services sector growth-driven market. It attracts more people and companies into business, be it IT, hospitality or other services sectors. The infrastructure is getting better by the day.
“Sometimes, people tend to stay away due to stirs. But the city fundamentals, such as good infrastructure, will lure them again,” he said.
“Setting up of new projects, such as the new international airport and educational institutions around Hyderabad and new IT projects in the suburbs creates new jobs that attract people to invest. This will happen again, even though we may see a subdued phase,” Mr Yoganand added.
DEMAND-SUPPLY GAP
Mr D. R. Patnaik, General Manager, Ramky Estates, part of the Ramky Group, said that APREDA and Builders Associations are confident that the real estate prospects are good in spite of temporary glitches due to agitations. But the housing sector needs clear segmentation, with a focus on affordable and mid-market housing category too.
“In fact, it may not be off the mark if all major builders take to these segments that will help keep their business steady, as there is always a demand for them.
Significantly, the luxury villa segment has shown growth of approximately 18 per cent. Apart from affordable segment housing, those taking up mid-market housing and are choosy regarding locations will do well,” Mr Patnaik said.
“But, generally, it is believed that unless there is speculative buying, which is vital to keep prices firm, the market sentiment is likely to be subdued. Most of the major metros, and even cities within Andhra Pradesh besides Hyderabad, have seen prices firming up after hitting lows a couple of years ago, after the real estate slowdown. But this hasn't happened in Hyderabad,” Mr Prem Kumar felt.
According to real estate consultants Cushman & Wakefield, a total demand of 2.3 million units of residential property is likely in the next five years, and the estimated supply is likely to be approximately one million, leaving a gap of approximately 1.3 million. In its recent report ‘Embracing Change — Scripting the future of Indian real estate,' the report analysed the top 10 cities, with each city reflecting a different pattern.
Unlike upward pressure on prices in cities such as Mumbai and Bangalore, where the supply is less, Hyderabad may see a lower demand-supply gap, therefore it is unlikely to see appreciation of capital values.
In another report, Cushman & Wakefield, while discussing commercial property, stated that Hyderabad, along with Chennai and Kolkata, would see a little gap between demand and supply, due to more cautious and planned developments, supported with the higher growth potential of demand.
APREDA mentioned that business sentiment is better, and some of the developers are looking at launching new projects after a subdued phase.
It feels the mega property show it is hosting from October 15-16 would provide the necessary excitement for prospects.