This report talks about the current status of Hyderabad Real Estate Market - 2013

1. For more on the report contact: Marutish@gmail.com

2. Telangana State – Update on political developments – Impact on Hyderabad Real
Estate Market – 01/08/2013
Ending the Period of uncertainty
The announcement of Telengana being the 29th Indian state of India happened on
30th July 2013. For the Hyderabad Real Estate Market his brings to an end a period
of uncertainty between the year 2010 to 2013. As a close observer of Hyderabad
Real Estate Market, there were many lows and only few highs in this period.
The previous announcement of a Telangana state on Dec 9 2009 by Union Home
Ministry caught many market participants in Andhra Pradesh by surprise. Many
thought it will be a temporary small blip of uncertainty for the market and had not
bargained or planned their business for a sustained agitation. With the Telangana
agitation stretching for a period of more than four years the market was bought to
its knees. In this period, very few builders launched new projects. Only builders
from outside Hyderabad and large builders from Andhra Pradesh launched new
projects in Hyderabad. Many medium and small builders, who launched their
projects in this period, struggled to sell their projects with the lackluster market.

3. The last financial year of 2013 was an average year for the Hyderabad Real
Estate Market. Demand picked up moderately and customers too came
forward to buying property. However from the beginning of this financial
year the sales in the Hyderabad Real Estate Market have been sluggish.
Customer walk-ins have declined and sales traction have been negligible. In
addition to the Telangana factor increased prices of apartments contributed
to the declining sales.
How will the announcement of a Telangana State impact the Hyderabad
Real Estate Market?

4. Builders from Andhra and Rayalaseema account for about 60-70% of the builders in
Hyderabad. However, investors from Andhra and Rayalaseema Region account for
about 30-40% of the new apartment or land sales in Hyderabad. With the
announcement of new state, we might see a temporary lull of about a year or two
from this segment of the market in new making purchases. Residents from Andhra
and Rayalaseema will continue work in Hyderabad, but they will think twice before
making any investment decisions in Hyderabad and they will plan to invest their
savings in the new state capital of Andhra Pradesh.
How much do Andhra and Rayalaseema Investors account for the real estate
market in Hyderabad

5. But the clarity on the Telangana state will improve the market sentiment and
speculative activity will increase. I have spoken to many investors from North and
West India who stayed away from the market and are willing to make a beeline to
Hyderabad in the coming quarters. Further investments from PE, NBFCs and other
institutional funding which were more or less stopped over the last few years will
also begin again into Hyderabad.
To sum up the contours of the Hyderabad have grown well beyond to have a real
term impact in the medium and long term, while in the short term, there could be
some capital flight from the city. In the short term too, the impact can be curtailed
if the new government of the state of Telangana assures the industry, that existing
policies would be continued.
The market sentiment is likely to improve

6. Private investment into Hyderabad Real estate industry has been pouring in the last
few years. As on today, Hyderabad will be the Joint Capital for a period of 10 years
between Telangana and Andhra Pradesh… Bulk of the investment into Hyderabad was
and is from Industrialists from Andhra and Rayalseema. These industrialists will not
stop further investment into Hyderabad but will be cautious and will also look at
investing in other cities of Andhra and Rayalseema regions to diversify their risk.
Capital flight from Hyderabad? – Will it continue to happen

7. Hyderabad with its fantastic infrastructure is competitive among leading Indian
cities in attracting capital from global and Indian companies based on various
factor conditions. The last four years have been bad for Brand Hyderabad. In
the period 2005-2008 Hyderabad was almost closing the gap on Bangalore in
terms of IT exports. While Hyderabad faltered in the last four years, Bangalore
has zoomed far ahead in this period.
With Metro Project ready to be launched in April 2015(Lane 3 first phase) the
Hyderabad Metro Rail project is keeping up with its timelines. This project along
with the ORR which is likely to be completed shortly will put Hyderabad among
the best cities with world class infrastructure globally. This infrastructure and
access will provide a great fillip to the growth of new residential and
commercial townships across Hyderabad City.
Hyderabad Infrastructure:

8. Hyderabad with its fantastic infrastructure is competitive among leading Indian
cities in attracting capital from global and Indian companies based on various
factor conditions. The last four years have been bad for Brand Hyderabad. In
the period 2005-2008 Hyderabad was almost closing the gap on Bangalore in
terms of IT exports. While Hyderabad faltered in the last four years, Bangalore
has zoomed far ahead in this period.
With Metro Project ready to be launched in April 2015(Lane 3 first phase) the
Hyderabad Metro Rail project is keeping up with its timelines. This project along
with the ORR which is likely to be completed shortly will put Hyderabad among
the best cities with world class infrastructure globally. This infrastructure and
access will provide a great fillip to the growth of new residential and
commercial townships across Hyderabad City.
Hyderabad Infrastructure:

9. Hyderabad real estate market has been very sluggish in the last few years. Most
of the developers are sitting on a significant stock of unsold inventory. Builders
too have been sitting on the inventory with a hope that the market will recover.
With an exception to few builders such as My Home, Aparna, Aditya
Construction and Mantri all the others have been facing tough times in the last
few years. Only few projects such as the following have done well in terms of
their sales velocity.
My Home Vihanga and My Home Abhra.
Aparna’s project new launches in Chandanagar and Nallagandla
Mantri Celestia
Aditya Construction projects in Shaikpet
In case of most of the other projects in Hyderabad the unsold inventory has
stretched to more than 16 to 20 quarters. The recovery of the Hyderabad
market, which was earlier expected to be in the second quarter of FY 2014, has
been elusive and it is expected that the demand may pick up steam by Jan 2014.
When will the market pick up steam?

10. Yes, in the last four years FY 09 to FY13 (last year), there has been a dip in the
top line of the real estate industry in Hyderabad due to slack demand. In the
short term, the prices may dip marginally because of unsold inventory and as
demand is still sluggish and supply currently overrides demand, while land
transactions may pick up. While ready/constructed housing prices may dip
marginally, projects were construction is on and announced projects might see
prices dip by about 5-10%.
What will happen in the medium and long term: It will depend on policies of
the new government in the state.
How will housing prices be affected in the short, medium and long term?

11. Which Geographies of the market look good?
Hyderabad West market – with a strong access and connectivity to the IT Zones
and developments is expected to perform well in the next two years.
What can investors do?
The fundamentals of real estate industry in Hyderabad are sound with the IT
and Pharma industry in Hyderabad performing creditably in a difficult business
environment in FY 2013. Hyderabad today is a competitive among various cities
in India and abroad. We expect that it will continue for the time to come.
Patience can be virtue in this market. Investors in realty could look at bargains
in the ready/constructed housing market in the next few quarters.
What can investors do?

12. For more on the report contact: Marutish@gmail.com
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