Hyderabad realty will do well despite slowdown

Hyderabad real estate sector has been going through a golden run which you have never expected, perhaps. How the sector is doing now?

There is a valid reason for the golden run that the Hyderabad real estate sector has been experiencing in the last three years. The sector in the city suffered stagnation nearly for a decade prior to this golden run.

As result, people were reluctant to buy properties during that decade of uncertainty. All the people who postponed their decision to buy property during those uncertain times purchased properties in last three years, pushing up demand in the residential property market.

Further, those who are not yet ready for purchasing new properties are advancing their decisions as they are under impression that they may not afford to own a property in the city in future in the wake of rising prices.

In your opinion, how long this golden run will go on?

Obviously, this golden run will not continue perpetually. The market will remain stable for a year or two as there are no visible reasons for a correction. However, as the land prices have skyrocketed in many areas of Hyderabad, projects may not be viable at current market rates.

There is a talk of economic slowdown in the country. IMF and other international agencies made it clear that global slowdown would be more pronounced in India. Don't you see this economic slowdown adversely impacting the Hyderabad realty?

Yeah, it's true that global agencies are giving different projections. But the fact of the matter is that India is inherently strong. Moreover, automakers like MG Motors and Kia Motors have been selling a good number of their new models like Kia Seltos and MG Hector. There is a change happening among Indian customers.

They want innovative and good products. If companies offer products or services that suit the changing tastes of Indian customers, they will do better. Furthermore, Indian economy is still growing at six per cent, which is a good growth. Besides, corporate tax and interest rates have been reduced – a move which will push up growth further. Investment cycle will revive. I don't think economic slowdown will impact Hyderabad market. It will continue to do well.

As you are aware, all major real estate markets barring Hyderabad and Bengaluru have hit slow lane. Hyderabad and Bengaluru are doing well due to local conditions……

NCR Delhi is going through slowdown due to excess supply of residential units. Delhi Development Authority (DDA) allotted lands to developers freely without looking at demand and supply dynamics.

Project finance was also made available for developers. But that did not happen in the South Indian markets of Hyderabad, Bengaluru and Chennai. Hyderabad and Bengaluru are growing organically. So, it is unlikely that these two markets will go through the crisis that NCR landed in now.

You know growth in Hyderabad and Bengaluru real estate markets is linked to IT sector. As there is a talk of recession in the US which accounts for majority of IT projects that Indian IT companies get, will there be any adverse impact on real estate in the two cities?

These days, Indian IT companies are not dependent on the US market alone. They get projects from Europe and other geographies.

Domestic market contribution is also huge. Our companies and governments are making extensive use of IT. Furthermore, IT companies will continue to operate even if there is a slowdown. Besides, it takes three to four years to complete a real estate project. It doesn't make a big difference if there is slowdown for a year or two. However, in current circumstances, developers need to be cautious.

Sumadhura, your group, is present in Benguluru and Hyderabad. Which of the two markets is driving your growth?

Both the cities are contributing to our growth. We have been doing real estate business in Bengaluru for the past 15 years. We entered Hyderabad market three years back. Despite our late entry into Hyderabad, this city now accounts for 30 per cent of our total revenues.

In Hyderabad, we are just taking up residential projects while Sumadhura is into both commercial and residential segments in Bengaluru. We also execute affordable housing and co-living projects there.

Bengaluru is a matured market compared to Hyderabad. Bengaluru market remains stable always, and so is a safe bet. But we are looking at increasing Hyderabad market's contribution to our business to 50 per cent.

The absorption of commercial space in Hyderabad is more than what it is in Bengaluru. Do you have any plans to launch commercial real estate project here?

But reports indicate that supply of commercial space will go up as there are large number of projects under construction now. So, we are not looking at commercial projects as of now. We will wait for some time.

Is Sumadhura eyeing any other markets and cities?

We have plans to enter Pune and Chennai markets. But we want to consolidate our business in Hyderabad before going to other cities. We are targeting a top line of Rs 500-600 crore this year. We are developing two new projects in Hyderabad and four projects in Bengaluru. We keep launching new projects regularly. We will soon launch a new project near Waverock SEZ in Gachibowli, Hyderabad. It will be tallest building in Hyderabad.

How the luxury real estate market is doing in Hyderabad?

Luxury market is also doing good in Hyderabad. It's small in size. There is a scope that a Hyderabad real estate company will become a national player in next three to four years.

The central government recently announced some measures to revive the real estate sector across the country. Are these measures enough to bring the key sector back on right track?

The government should extend infrastructure status to real estate if it wants to bring the sector back on right track. The government has enacted RERA to regulate the sector.

But without giving infrastructure or industry status to the sector, there is no point in bringing the regulator. Secondly, there should be single window clearance system. The Centre should take the initiative and enact a national framework on this on the lines of RERA. Approvals are taking a lot of time now.

Sometimes, we have to wait for two years to get all the approvals in Karnataka. Real estate is a capital-intensive business. A delay in project execution will result in cost escalation which a developer passes on to customers. If we get faster approvals, we can offer houses to customers at lower prices.

What is your take on policies related to real estate sector in Telangana?

Telangana has best policies for the sector. No other state in the country has such policies. Creating infrastructure and giving approvals are very important for real estate sector's growth. Telangana is the best in both the aspects.