Slowdown takes sheen off Hyd realty's golden run

For the last three years or so, Hyderabad real estate sector has seen a golden run as apartments and open plots have been selling like hot cakes. There is a reason for the sudden realty 'bull run' in the city.

Real estate sector in Hyderabad suffered for nearly a decade on account of separate Telangana agitation while the country's other major cities logged in decent growth in this space.

However, the sector came back with a bang post the formation of Telangana State and as consequence, land prices in the city and its outskirts skyrocketed. So were the sales.

But the current economic slowdown seems to have put breaks on the sector's dream run in the City of Pearls.

"Open plots sales have come down by almost 50 per cent due to slowdown fears.

People buy open plots as an investment option. With the intense talk of recession on social media, people are not showing interest in buying open plots now as they seem to be worried about the future growth," a realty association leader told The Hans India.

He further said steep rise in prices was also acting as a deterrent. "In some areas, land prices registered three to four-fold jump.

As consequence, people are not keen on investing on open plots at this juncture," he said.

The association leader further said apartment sales also hit slow lane. "People are deferring their decisions to buy apartments as they are expecting fall in prices due to recession.

Some people fear loss of jobs due to slow down. So, they are not willing to buy properties during this period of uncertainty," he explained.

According to him, enquiries for new apartments came down drastically. "We are getting five enquiries in the place of 10 enquiries earlier. Furthermore, most of the enquiries are not translating into sales. That was not the case earlier," he said.

Reports by real estate consultancies also reveal fall in sales in Hyderabad. Realty consultancy Anarock Research in a report said that housing sales in Hyderabad fell by 32 per cent to 3,280 units during July-September 2019, as compared to the same period last year.

New launches also dropped by 48 per cent to 2,050 units in that period. In another report, the consultancy firm said that housing sales in Hyderabad were down by four per cent to 13,110 units in the first nine months of 2019.

But some developers and other real estate players appear optimistic and rule out any adverse impact of economic slowdown on Hyderabad real estate.

C Shekar Reddy, Convenor, Infra & Real Estate Panel, CII Telangana, feels that as of now there is no adverse impact of economic slowdown on Hyderabad real estate.

"All developers are doing well. Hyderabad is still the cheapest destination for real estate investment. That's reason why companies are preferring Hyderabad to even Bengaluru when it comes to leasing or buying commercial space," he reasoned.

He however says there are several international and domestic hiccups besides perception issues in the wake of slowdown talk. "There is negative sentiment among people about slowdown.

In spite of it, Hyderabad real estate is doing well. Our builders are receiving good bookings for apartments. Traction in open plot sales is also good so far," said Reddy, also Chairman & Managing Director of CSR Estates Limited.

He underlined the need for keeping property prices in check. "Hyderabad is preferred destination because of cost factor.

It is the responsibility of the government and developers to see that this city will have cost advantage even after 20 years," he said.

Reddy further observed that the sector would do well so long as property prices remained within reach of local population. "No recession or slowdown will impact the sector if local customers are able to buy the properties here," he added.

Concurring with him, P Ramakrishna Rao, president, Credai Hyderabad, said that slowdown had not impacted Hyderabad realty.

"We are in a globalised economy. So, everyone will be affected if there is a slowdown or recession. Compared to many other cities, we have not been impacted so far. But we don't know what will happen in future," Rao maintained.

He feels that there will be supply constraints over next eight months because not many new projects have been launched.

Asked whether apartment prices will go up if there is any shortage of supply, he said prices will go up only when land and input cost increases.

"GST Council removed input tax credit (ITC) for developers while reducing GST on the sale of under-construction properties.

This has increased financial burden on developers as input materials like cement are taxed at 18 per cent. The Centre should rationalise tax on input materials to reduce overall construction cost," he explained.Madhusudhan Reddy