Credit: Casey Horner | UnsplashHyderabad vs Pune: Analyzing Real Estate Competitiveness
June 5, 2020Real Estate
Hyderabad and Pune have shown great promise in the last years, especially when it comes to real estate development. But which city is more competitive and whets investors’ appetite the most? During our last GRI Club India eMeeting, members gather to put an end to this debate, and weigh the pros and cons of real estate development in these two diamonds in the rough. After an hour of discussion, members agreed that at the moment Hyderabad is showing more favorable conditions for real estate development, nevertheless it will not keep a foothold for long as Pune continues to flourish.
How did these Cities Perform in 2019?
2019 was a much better year for Hyderabad than most predicted. The city recorded an absorption of 11 million ft2 in the IT sector alone. The IT sector’s consumption patterns in 2019 have matched up with the patterns absorbed in Bangalore by the IT sector. When it comes to the residential sector, the city experienced an increase in prices which can be attributed to the developer’s switching to the IT sector, leaving few to attend the residential sector.
Pune, the Queen of Deccan, continues to boast a stable demand from the IT sector year-on-year with a demand of 400 million ft2. Its residential sector in 2019 had more than 50 percent of its residential units booked from new projects. The city has a hefty pipeline of large projects to be developed in the near future, showing potential for more ft2.
Weighing the Pros and Cons
When getting down to the analysis of numbers, results, reports, opinions and surveys, Hyderabad seems to be the obvious winner for various industry members.
While Hyderabad has taken lead on the IT side, a lot of members believe that Pune is the dark horse that may catch-up and surprise Hyderabad. With good quality supply in both the cities, their airports and political scenarios are likely to be the differentiators. The market participants strongly believe that Pune is going to give Hyderabad a good run for money in the future.
COVID-19’s Impact on Competitiveness
According to participants, the post-pandemic price is not likely to be a determinate on the amount of space both of these cities absorb. The underlying drivers will continue to play its part.
COVID-19 poses a challenge for Hyderabad as it is the city with the highest density in India.
Even during the pandemic Pune’s residential projects have continued to achieve numbers on the board. New developers believe that now would be a good time to look at vibrant markets such as Pune as it has a strong hold in a variety of asset classes. The city could offer good stressed assets that could provide an entry. Underwriting is also a challenge that will arise after the pandemic, and there are many strategies being considered.
Residential Sector
In the last 10 years, the residential sector has been the top markets for both Pune and Hyderabad. Pune for instance has seen an increase of 90 percent in the last 10 years, while Hyderabad has experienced a 60 percent increase. Hyderabad and Pune are two markets which are quite the opposite of each other. Pune is a market with very price-sensitive small units while Hyderabad has consumption patterns for larger units.
Hyderabad’s residential market has been doing rather well in the past two to three years, and its ready-to-move-in inventories sold out. Its housing units are larger in size in comparison to other cities, however there is possibility of these being reduced. Even in pre-pandemic times, Hyderabad witnessed a slight dip in the residential sales. It has multiple projects in the pipeline that now focus on smaller sized units. The market will need to see how this plays out.
Pune has continued to have sales and bookings in March, the onset of the lockdown. In average, there were 1019 units sold i.e. completed transactions paid and registered in March. In the month of April, 34 percent i.e. 343-unit sales have taken place in the four micro markets. Pune has always proven to be a very stable market with a one or two percent appreciation in recent years.
The Indian Silicon Valley: Supply and Demand
Besides decentralization, talent is a relevant factor for determining which city is the most attractive. Costs related to the cities are also relevant, but the demand continues to grow on at a steady pace. Regarding the increase in rental charts in the past 10 years, Pune has seen an increase of 70 percent, while Hyderabad has experienced a 55 percent increase. The net absorption recorded in Pune is 4 million ft2 against the actual absorption of 7 million ft2. Hyderabad currently has an absorption of approximately 10 million ft2.
For Hyderabad, the boom arrived last year, mostly driven by its infrastructure push, as well as marquee tech names establishing large campuses and its high rank on the livability index. The city has witnessed huge consumption of IT, with great supply of IT development on the horizon, which is close to around 70 million ft2 of organized IT under development. An upcoming project that has sparked interest in the city is Aerocity. It will consist of 1500 acres of space to be developed into office projects in a campus style mixed-use development which provides a significant advantage. The main worry for this market revolves around the number of supplies being generated by the city. The jury is still out on whether it will be able to sustain this kind of momentum in the medium and long term.
Pune has been well liked by majority of the developers, due to the fact that the real estate market is well-diversified, from manufacturing and to IT and banking. On average, rentals have been higher in Pune (more than 80 percent) than in Hyderabad (60-70 percent). Nevertheless, the problem that remains is the infrastructure, specifically airports. By the time the new Panvel airport is ready, the market will have already missed out on many opportunities.
Logistics on the Rise?
Pune is already a major logistics hub with the development in Chakan, Rajangaon and in comparison to Hyderabad, Pune also a much larger market. It has seen a fair amount of industrial activity in the past 15 years with a presence of large auto-mobile companies. The industry players believe that the markets will see an increase in demand from the automobile giants further bolstering growth.
Hyderabad on the other hand is an unorganized market largely driven by small scattered spaces occupied by third party logistics and pharma companies. Its demand is largely consumer driven, which happens to be the e-commerce industry with Amazon having the largest space at the Hyderabad airport. In the next 3-4 years, the participants believe that Hyderabad is likely to see a lot more industrial supply.
How did these Cities Perform in 2019?
2019 was a much better year for Hyderabad than most predicted. The city recorded an absorption of 11 million ft2 in the IT sector alone. The IT sector’s consumption patterns in 2019 have matched up with the patterns absorbed in Bangalore by the IT sector. When it comes to the residential sector, the city experienced an increase in prices which can be attributed to the developer’s switching to the IT sector, leaving few to attend the residential sector.
Pune, the Queen of Deccan, continues to boast a stable demand from the IT sector year-on-year with a demand of 400 million ft2. Its residential sector in 2019 had more than 50 percent of its residential units booked from new projects. The city has a hefty pipeline of large projects to be developed in the near future, showing potential for more ft2.
Weighing the Pros and Cons
When getting down to the analysis of numbers, results, reports, opinions and surveys, Hyderabad seems to be the obvious winner for various industry members.
- Infrastructure: Hyderabad boasts the best infrastructure amongst the other cities. While Pune having an inherent advantage, has not pushed much for infrastructure development. However, there has been a development in Pune with the Metro project and accessibility to Hinjewadi.
- Inventory: Pune has a mix of old and new inventory, which increases the need for the developers to chip in the extra 500-700 per ft2 toward retro fitting the asset. While, the majority of the inventory in Hyderabad is new, hence the question on upgrading the inventory does not arise.
- Appetite: The government packages given to MSMEs will help give job security and continue supporting sales traction. Leaders believe that the impact of these government packages are inclining more toward the Pune market as it is a major manufacturing hub. Nevertheless, for the next four to five years, Hyderabad is likely to be the dominant city when it comes to the office market. Even on the residential side this is an outlier market which continues to grow.
While Hyderabad has taken lead on the IT side, a lot of members believe that Pune is the dark horse that may catch-up and surprise Hyderabad. With good quality supply in both the cities, their airports and political scenarios are likely to be the differentiators. The market participants strongly believe that Pune is going to give Hyderabad a good run for money in the future.
COVID-19’s Impact on Competitiveness
According to participants, the post-pandemic price is not likely to be a determinate on the amount of space both of these cities absorb. The underlying drivers will continue to play its part.
COVID-19 poses a challenge for Hyderabad as it is the city with the highest density in India.
Even during the pandemic Pune’s residential projects have continued to achieve numbers on the board. New developers believe that now would be a good time to look at vibrant markets such as Pune as it has a strong hold in a variety of asset classes. The city could offer good stressed assets that could provide an entry. Underwriting is also a challenge that will arise after the pandemic, and there are many strategies being considered.
Residential Sector
In the last 10 years, the residential sector has been the top markets for both Pune and Hyderabad. Pune for instance has seen an increase of 90 percent in the last 10 years, while Hyderabad has experienced a 60 percent increase. Hyderabad and Pune are two markets which are quite the opposite of each other. Pune is a market with very price-sensitive small units while Hyderabad has consumption patterns for larger units.
Hyderabad’s residential market has been doing rather well in the past two to three years, and its ready-to-move-in inventories sold out. Its housing units are larger in size in comparison to other cities, however there is possibility of these being reduced. Even in pre-pandemic times, Hyderabad witnessed a slight dip in the residential sales. It has multiple projects in the pipeline that now focus on smaller sized units. The market will need to see how this plays out.
Pune has continued to have sales and bookings in March, the onset of the lockdown. In average, there were 1019 units sold i.e. completed transactions paid and registered in March. In the month of April, 34 percent i.e. 343-unit sales have taken place in the four micro markets. Pune has always proven to be a very stable market with a one or two percent appreciation in recent years.
The Indian Silicon Valley: Supply and Demand
Besides decentralization, talent is a relevant factor for determining which city is the most attractive. Costs related to the cities are also relevant, but the demand continues to grow on at a steady pace. Regarding the increase in rental charts in the past 10 years, Pune has seen an increase of 70 percent, while Hyderabad has experienced a 55 percent increase. The net absorption recorded in Pune is 4 million ft2 against the actual absorption of 7 million ft2. Hyderabad currently has an absorption of approximately 10 million ft2.
For Hyderabad, the boom arrived last year, mostly driven by its infrastructure push, as well as marquee tech names establishing large campuses and its high rank on the livability index. The city has witnessed huge consumption of IT, with great supply of IT development on the horizon, which is close to around 70 million ft2 of organized IT under development. An upcoming project that has sparked interest in the city is Aerocity. It will consist of 1500 acres of space to be developed into office projects in a campus style mixed-use development which provides a significant advantage. The main worry for this market revolves around the number of supplies being generated by the city. The jury is still out on whether it will be able to sustain this kind of momentum in the medium and long term.
Pune has been well liked by majority of the developers, due to the fact that the real estate market is well-diversified, from manufacturing and to IT and banking. On average, rentals have been higher in Pune (more than 80 percent) than in Hyderabad (60-70 percent). Nevertheless, the problem that remains is the infrastructure, specifically airports. By the time the new Panvel airport is ready, the market will have already missed out on many opportunities.
Logistics on the Rise?
Pune is already a major logistics hub with the development in Chakan, Rajangaon and in comparison to Hyderabad, Pune also a much larger market. It has seen a fair amount of industrial activity in the past 15 years with a presence of large auto-mobile companies. The industry players believe that the markets will see an increase in demand from the automobile giants further bolstering growth.
Hyderabad on the other hand is an unorganized market largely driven by small scattered spaces occupied by third party logistics and pharma companies. Its demand is largely consumer driven, which happens to be the e-commerce industry with Amazon having the largest space at the Hyderabad airport. In the next 3-4 years, the participants believe that Hyderabad is likely to see a lot more industrial supply.
