Can Hyderabad realty buck slowdown?

Indian economy is heading for a slowdown. That's for real. Key sectors like manufacturing and agriculture has hit a slow lane for the past one year or so.

No surprise even if the economy slips into a prolonged recession. Economic slowdown or recession means hard times for the governments as well as private sector.

This was amply evident when Telangana Chief Minister K Chandrashekar Rao presented full State Budget for FY20 earlier this month. Weighed down by recession, the Telangana Government slashed its Annual Budget Estimates for FY20 by a whopping 20 per cent to Rs 1.46 lakh crore from Rs 1.82 lakh crore projected in the vote-on-account Budget presented in February this year.

Interestingly, the State government did not allocate enough funds in the Budget for infrastructure development in Hyderabad.

The moot question now is whether the Hyderabad real estate market will continue its golden run despite recessionary tendencies in the economy.

This question assumes significance in the wake of the Hyderabad real estate going through a golden run after the State bifurcation in 2014.

However, the real estate companies and players strongly feel that the Hyderabad market will not be adversely impacted by the economic slowdown that the country is currently going through.

"I feel that slowdown is being overhyped. We continue to see good sales traction in our projects. For the last 18 months, we have seen good sales momentum in the projects with good location and price points.

The same momentum is continuing now as demand in Hyderabad, unlike in other metros, is end user driven," Chennuru Rakesh Reddy, Director, Aparna Constructions and Estates, told The Hans India.

Reddy further pointed out that Hyderabad already surpassed Bengaluru in office space absorption. "The H12019 leasing was more than 4 times that of H12018 and the quarter-on-quarter numbers were up 54 per cent.

More than 2.5 million sft office space was leased last quarter. All this commercial expansion will lead to more jobs being created and hence more demand for residential apartments," he explained.

Pointing out that property prices are still cheapest in Hyderabad compared to all other metros, Gummi Ram Reddy, president, Credai Telangana, and CMD of Ark Group, feels that the City of Pearls offers several advantages to home buyers and so the slowdown will not have any big impact on the sector in the city.

"People are looking at Hyderabad as the best option as realty in many metros is going through a slump. Furthermore, real estate is the best option for investment when other avenues like stock markets are not doing well and the price of gold is hitting through the roof," he said.

He however cautioned that there might be small slump because of psychological impact. "It's very difficult to predict the future course that real estate market takes.

Generally, companies launch projects after conducting extensive market studies. Still, many big real estate companies landed in trouble. Therefore, it's always better to play safe. That's what I do," he said.

B Sunil Chandra Reddy, Secretary-General, Telangana Real Estate Developers Association (Treda), also feels that Hyderabad market will continue to grow despite the slowdown across the country.

"Real estate market in Hyderabad stagnated between 2009 and 2015 when real estate in other metros was booming. That was primarily because of the agitation for the Telangana statehood.

Post the bifurcation, the market came back on growth track as the KCR government took up several pathbreaking incentives to infuse confidence among home buyers – both investors and end users," he said.

The Treda Secretary-General maintains that property prices in Hyderabad are cheaper than even Tier 2 cities like Coimbatore, Nagpur and Surat.

"Hyderabad is home to world class infrastructure like airport, Outer Ring Road and flyovers. As consequence, many global companies like Amazon came forward to establish their offices here. Demand for residential units will automatically go up when commercial space is absorbed," he said.

He further remarked: "There is an enormous scope for more and more companies setting up their operations in the city as prices are extremely low and competitive.

That will further drive the growth of the residential sector. There will not be any correction in Hyderabad market. The growth trend will continue for next one and a half year".

Asked about the steep rise in prices of lands in Shankerpally and nearby areas on the outskirts of Hyderabad, he said that such areas would still offer good growth potential.

"Thanks to Outer Ring Road, travel time from IT hubs of the city to Shankerpally and nearby areas is just 40 minutes. That's why people are buying properties there as an investment," he explained.

He also said that 'Look East' policy unveiled by the Telangana government would de-congest the city and ensure development around the city. "It is a good move which will pay rich dividends in future," he said.