Hyderabad realty growth slowing down

What is your take on Amaravati, the new capital of Andhra Pradesh?

I announced six years back that Amaravati would not be a right place for large real estate projects. I discouraged many developers who wanted to launch projects there. In my opinion, it's not a right place to do real estate business at this point of time.

I have my own reasons for that. If I want to launch projects in Amaravati under Praneeth Group, I need to take up 400 or 500 residential units in a single project. It is not viable for company like ours to take up projects with 50 or 25 units.

Going to Amaravati every 15 days for overseeing such small projects is a sheer waste of time. In the same time, I can construct 1,000 units in Hyderabad and sell them. Furthermore, the combined population of Amaravati, Tenali, Guntur and Vijayawada is hardly 20 lakh, a fraction of the population in Hyderabad, which has 30 lakh people who earn over Rs 1 lakh a month.

Therefore, Hyderabad has a big real estate market while there is no market in Amaravati. The AP's new capital will take at least 15 more years to mature.

Do you think AP Government will develop Amaravati?

I don't know about it. Also, I don't want to comment on political issues. Many developers already came back from that market. Hyderabad has best infrastructure, best entertainment, best connectivity and best social infrastructure like schools.

Then why should people go to Amaravati? Besides, we need to see market size. However, I am not downsizing the importance of Amaravati market.

However, it is a small market. So, it's unfair to compare Hyderabad with Amaravati. It's a fact that developers and people who left Amaravati will invariably invest in Hyderabad market. That way, Hyderabad market will benefit.

Hyderabad real estate market has been going through a golden run for the past few years. How long these bullish conditions will continue?

The fact of the matter is that there will always be serious new home buyers at any given point of time. They will buy homes irrespective of market conditions and recessionary tendencies.

The main problem is with investors or speculators who play spoilsport. Investor is not the right customer for the sector. He wants to make a fast buck.

Real estate companies which rely on end users will always do better. Sustainable and gradual growth is good for the sector, not sudden boom. One has to be a stakeholder in the sustainable market, not in bullish market.

But will the golden run continue for long?

In my opinion, real estate growth is decelerating in Hyderabad. It will continue to decelerate. It should happen. It may continue for six months more.

Then, the growth will stagnate. The other issue is that apartment prices have not appreciated the way lands did. In last two years, land prices have gone up four times.

In areas where land was available at Rs 1 crore per acre, the price has gone up to Rs 4 crore per acre. But apartment prices have not gone up from Rs 2,500 per sft to Rs 10,000 per sft.

So, rise in land prices is not a real growth. Some people indulge speculation, make money and exit from the market.

When did you establish Praneeth Group?

We set up Praneeth Group 12 years ago in 2007. We entered the market when the economy was heading towards recession. Praneeth Group has so far executed more than 20 projects.

We built villas and apartments. Our group also entered IT office space recently. We are developing an integrated township in 300 acres in Bowrampet.

The project, which is in its initial stages will have apartments, villas, malls, hospital, hotels, convention centre, sports facilities and commercial space. Villas will come up in 70 acres in the mega project.

We have 450 acres of land bank. We have lands in Kukatpally, BHEL area, Gopanpally, Khajaguda, Kolluru and Velimela. That way, we are expanding to all parts of the city.

Last year, we did a total business of Rs 350 crore in real estate. We may do Rs 400 crore this fiscal.

Is Praneeth Group developing layouts and open plots also?

We are not into open plots business right now. We may do it in future. It offers faster returns. Generally, people who develop layouts won't do construction and vice versa.

However, brands can be established in construction and development, not in open plots business.

Will 'Look East' policy announced by the Telangana government reduce pressure on western side of the city?

Hyderabad is expanding on all sides. The city has grown in all corners including Uppal, LB Nagar, AS Rao Nagar. But expansion is not as rapid as the western part has witnessed over the years.

However, high rise buildings will not be viable in eastern side of the city as construction cost will go up as the height increases.

High income group people can afford properties in high rise buildings. Most of high-income groups are living in western side of the city. However, small projects will be viable in the East.

I announced six years back that Amaravati would not be a right place for large real estate projects. I discouraged many developers who wanted to launch projects there. In my opinion, it's not a right place to do real estate business at this point of time.

I have my own reasons for that. If I want to launch projects in Amaravati under Praneeth Group, I need to take up 400 or 500 residential units in a single project. It is not viable for company like ours to take up projects with 50 or 25 units.

Going to Amaravati every 15 days for overseeing such small projects is a sheer waste of time. In the same time, I can construct 1,000 units in Hyderabad and sell them. Furthermore, the combined population of Amaravati, Tenali, Guntur and Vijayawada is hardly 20 lakh, a fraction of the population in Hyderabad, which has 30 lakh people who earn over Rs 1 lakh a month.

Therefore, Hyderabad has a big real estate market while there is no market in Amaravati. The AP's new capital will take at least 15 more years to mature.

Do you think AP Government will develop Amaravati?

I don't know about it. Also, I don't want to comment on political issues. Many developers already came back from that market. Hyderabad has best infrastructure, best entertainment, best connectivity and best social infrastructure like schools.

Then why should people go to Amaravati? Besides, we need to see market size. However, I am not downsizing the importance of Amaravati market.

However, it is a small market. So, it's unfair to compare Hyderabad with Amaravati. It's a fact that developers and people who left Amaravati will invariably invest in Hyderabad market. That way, Hyderabad market will benefit.

Hyderabad real estate market has been going through a golden run for the past few years. How long these bullish conditions will continue?

The fact of the matter is that there will always be serious new home buyers at any given point of time. They will buy homes irrespective of market conditions and recessionary tendencies.

The main problem is with investors or speculators who play spoilsport. Investor is not the right customer for the sector. He wants to make a fast buck.

Real estate companies which rely on end users will always do better. Sustainable and gradual growth is good for the sector, not sudden boom. One has to be a stakeholder in the sustainable market, not in bullish market.

But will the golden run continue for long?

In my opinion, real estate growth is decelerating in Hyderabad. It will continue to decelerate. It should happen. It may continue for six months more.

Then, the growth will stagnate. The other issue is that apartment prices have not appreciated the way lands did. In last two years, land prices have gone up four times.

In areas where land was available at Rs 1 crore per acre, the price has gone up to Rs 4 crore per acre. But apartment prices have not gone up from Rs 2,500 per sft to Rs 10,000 per sft.

So, rise in land prices is not a real growth. Some people indulge speculation, make money and exit from the market.

When did you establish Praneeth Group?

We set up Praneeth Group 12 years ago in 2007. We entered the market when the economy was heading towards recession. Praneeth Group has so far executed more than 20 projects.

We built villas and apartments. Our group also entered IT office space recently. We are developing an integrated township in 300 acres in Bowrampet.

The project, which is in its initial stages will have apartments, villas, malls, hospital, hotels, convention centre, sports facilities and commercial space. Villas will come up in 70 acres in the mega project.

We have 450 acres of land bank. We have lands in Kukatpally, BHEL area, Gopanpally, Khajaguda, Kolluru and Velimela. That way, we are expanding to all parts of the city.

Last year, we did a total business of Rs 350 crore in real estate. We may do Rs 400 crore this fiscal.

Is Praneeth Group developing layouts and open plots also?

We are not into open plots business right now. We may do it in future. It offers faster returns. Generally, people who develop layouts won't do construction and vice versa.

However, brands can be established in construction and development, not in open plots business.

Will 'Look East' policy announced by the Telangana government reduce pressure on western side of the city?

Hyderabad is expanding on all sides. The city has grown in all corners including Uppal, LB Nagar, AS Rao Nagar. But expansion is not as rapid as the western part has witnessed over the years.

However, high rise buildings will not be viable in eastern side of the city as construction cost will go up as the height increases.

High income group people can afford properties in high rise buildings. Most of high-income groups are living in western side of the city. However, small projects will be viable in the East.