Credit: Surangaw / Envato ElementsIs Hyderabad real estate really realistic?
Financial institutions believe in the long-term growth story of Hyderabad’s realty market, both in commercial and residential. The city is likely to emerge as a winner in coming years as companies across all domains have started concentrating on the digital push and thrust for IT services. This would push the demand for quality spaces by tech companies in the city as it supports all requirements of tenants looking for expansion.
Consumption of Grade – A stock would remain robust in the short term as COVID has pushed companies to scout for quality office projects. Hyderabad will continue to dominate in the medium to long term as companies would continue to prefer Hyderabad for their business expansion. The city needs to push the pace of infrastructure development by two to three times to square off the implausible financial indicators generated from high land valuations in the city. Supply needs to be streamlined based on post-COVID demand to avoid an oversupply situation in the long term. Emergence of opportunities in new asset classes would soften office supply gradually. Logistics & Warehousing activity in the city has picked up in the last few years and the city is likely to witness new players entering into this segment going forward.
Post Telangana formation, demand has outpaced the supply across all segments as new business friendly policies got introduced in the initial years. This healthy traction has continued even during the pandemic especially in the residential segment. Upcoming office demand requires quality office space, thus Grade A supply is likely to be absorbed faster in the city. Overwhelming demand in the past few years has pushed the land prices higher and severely impacted the land valuations. Transition of the city's residential market from price-centric to quality-driven has helped the residential prices to soar high in key markets. As interest rates touched a decade-low, new buyers have actively shown interest to buy a house from Grade-A developers. Historic absorption of office space in the city in the last two to three years has also helped the residential market by creating new constituencies of demand.
Office real estate in the city is likely to witness a consolidation in the medium term but expected to remain very robust in the long term. As capital from all industries in the city goes into lands like pharma companies, manufacturing industries, etc. through investments and acquisitions, prices have skyrocketed over the last few years across all parts of the city. Newly emerged office micro markets like Kokapet would attract tenants due to price advantage compared to other markets.
Other takeaways
- Plotted development has seen entry of Grade-A developers too in the city as buyers are keen to own a piece of land. Demand for plots has seen a massive surge across all towns and cities lying along the upcoming Regional Ring Road.
- Hyderabad is likely to see the return of employees to offices much faster than other cities as travel time from home to work is comparatively very low in the city. This would encourage other stakeholders to fasten the speed of return to offices across other major cities.
- The opinion was that Hyderabad remains an attractive market from a commercial and residential asset class standpoint, with it emerging strongly as an industrial and warehousing hub as well. The land price movement is a little concerning, but with a more wide-spread infrastructure development across the city, the prices would become more rational.
JLL
JLL is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion, operations in over 80 countries and a global workforce of more than 91,000 as of December 31, 2020.
