Hyderabad realty growth will continue

How the Hyderabad real estate sector is doing now?

Real estate sector in Hyderabad is going strong. The sector is now as strong as it has been for the past three years. The city witnessed record absorption of office space last year. Over 10 million sft of office space was taken on lease in the city last year. The previous highest was 6.8 million sft. The city registered consistent growth in commercial realty during the past three to four years, which is good news. Moreover, we already tracked office space transactions of three million sft in the first two months of 2020. That means 30 per cent of last year's entire consumption has already been achieved in January, February this year. This is a clear indication that the growth momentum is intact. Further, IT sector is registering consistent and organic growth. As consequence, companies are lapping up all the available office space in the city. But supply is less now. However, more supply will come in.

How long will bullish conditions in Hyderabad market continue?

This calendar year looks fine. However, it is not easy to forecast about future. But Hyderabad is home to offices of world's largest companies like Google, Amazon, Delloitte and Microsoft. The largest bases of some of these companies outside the US, are in Hyderabad. These companies are here to stay. They register consistent growth year after year. So, I don't think Hyderabad realty will have any problem over next four to five years.

For the first time, Hyderabad outpaced Bengaluru in office space absorption in the second half of 2019. Will the City of Pearls repeat this feat this year?

The growth momentum is visible. The city did record numbers in the first two months. The technology sector is driving the consumption of the office space here. We expect the momentum to continue as Hyderabad has some distinct advantages. Whenever IT companies get large projects, they look at the countries where they can find readily available talent and office space. For obvious reasons, India is the first option for them. Then, the companies look for the city in India, which can fit into their scheme of things. Hyderabad has good IT ecosystem, abundant talent pool and enough land for constructing office space. Besides, cheaper living cost and good infrastructure are the other advantages. Further, the Telangana government's proactive policies are also helping the IT sector and real estate in a big way.

How much office space supply is in pipeline now in Hyderabad?

In terms of announcements by developers, over 100 million sft of office space is in pipeline in the city. However, availability of office space will be in tune with demand scenario. Therefore, 20 to 30 million sft will be ready to occupy over next two to three years. However, we can't rule oversupply if developers rush to build office space without keeping pulse of customers in mind. Moreover, office rentals are increasing by 10 per cent year-on-year, which is on higher side. The ideal upswing is around 5 per cent. When it comes to retail commercial space, Hyderabad has very few malls, but success rate is not very encouraging. Further, builders are not keen on developing malls as they can't benefit from higher FSI availability in IT hub.

Will the residential real estate continue its growth track in the city?

Presently, builders are focusing more on commercial projects. As result, there are not many new residential projects in the city. Builders will soon realise that there will be higher growth potential in residential segment. It's better if developers launch good residential projects with different configurations like 1 BHK, 2BHK and 2.5 BHK. Hyderabad is known for bigger residential units like villas. Now, people will prefer high-rise buildings. Moreover, millennials will opt for smaller units. Co-living concept will also gain traction here. These new trends will drive growth of the residential real estate segment in Hyderabad.

The Andhra Pradesh government has decided to create three capitals instead of one Amaravati Greenfield capital. As there is a delay in developing AP's capital, are the real estate investors from AP coming to Hyderabad now?

We have heard about that. It can't be denied. There is lot of wealth in Andhra Pradesh, but investment opportunities are less there. Obviously, investors need to put their money somewhere and protect their wealth. Also, they expect some returns on the investments. Further, most of investors in Andhra Pradesh are familiar with the Hyderabad market. So, they are comfortable with the market here. For them, Hyderabad is the most exciting place to invest. Bengaluru also continues to be dominated by investors from AP and Telangana. However, any State which offers good growth opportunities can attract investors. Visakhapatnam is also good city.