As GST, RERA bite realty; new projects dry up in Hyderabad

Hyderabad: Is the Hyderabad's real estate sector in good stead as some paint it to be? It does not look like so going by the steep decline in the number of new projects launched during September quarter this fiscal.

A recent report by Cushman & Wakefield, a real estate services company, estimated that new launches in the city's residential real estate sector went down by a whopping 55 per cent during July-September 2017. The other interesting take-away from the study is that all of whatever launches happened during the three-month period were in mid-end segment.

"The city witnessed a significant decline in new unit launches during 3Q, 2017 (July-September), to around 1,030 units (a decline of 55 per cent year-on-year). The implementation of the Real Estate (Regulation & Development) Act, 2016 and the new Goods and Services Tax (GST) caused developers to focus on ensuring compliance with the new regulations and completing," the C&W report titled Market Beat said.

All the launches in the quarter occurred in the mid-segment, concentrated in and around Gachibowli, it added. The report further stated that there was no price appreciation as well. “The quarter saw rentals and capital values maintain previous levels, as developers – in a bid to clear existing unsold inventory – refrained from hiking prices,” it reasoned. However, the exception is the sub-markets like Himayatnagar and Gachibowli where prices have gone up in high-end segment by seven and four per cent respectively during July-September period.

“Madhapur and Gachibowli areas are doing well. However, velocity is not high in peripheral locations. As RERA is not fully in place in Telangana, new approvals are not coming in. As consequence, new launches have come down,” Veera Babu, Managing Director-Hyderabad, Cushman & Wakefield, told The Hans India.

The C&W report expects buyer sentiment to gradually recover in the current festive quarter, leading to uptick in sales. But it warned that any further delay in announcing RERA rules by the Telangana government would hit the sector hard. “Given the existing delay in announcing RERA rules, any further hold-up is likely to slow the expected revival of market sentiment that could result from projects being completed and registered,” the report said.

However, developers and real estate companies are optimistic about future demand as real estate prices in Hyderabad are very low compared to other markets and properties here offer value for money. “New launches have come down in Hyderabad because of three reasons – demonetisation, RERA and GST.

It is not that we oppose RERA. We support every initiative of the government. But the sector need to get a clarity on it so that it can go ahead with new launches. We are not getting clarity,” P Dasarath Reddy, Managing Director, Sri Sai Sterling Homes Private Limited, and Primus Developers.
According to him, property prices have not gone up in Hyderabad for the past seven years due to a variety of reasons. “We expect prices to go up as there is clarity on many issues now” he said, adding the Hyderabad market would witness a large number of launches in near future. C&W’s Veera Babu also says that people are bullish about the city’s real estate market. “People are still bullish about the market. Lot of investors are coming in in terms of acquisition of land,” he said.

By P Madhusudhan Reddy