Hyderabad sees good offtake in office space

The last few months have seen the absorption of about five million sq. ft. of office and commercial space in Hyderabad, reflecting the interest for the metro as a business destination.

This is set in the backdrop of the troubled times following the stir for Telangana and the political transition with a new Chief Minister taking over late last year.

. There is a growing interest from commercial property buyers, which usually rub off on sales of housing projects, but the recent absorption shows a mixed trend in housing in Hyderabad, and other cities as well.

The demand for high-end units remains unaffected, depending on the location and price, say builders. So is the case at the other end of the spectrum, the mass segment. The supply in the affordable segment is still missing as most developers in the past four-five years preferred to focus on a market on a rung above that segment.

No speculative interest

An interaction with a cross section of players shows a pretty cautious approach to purchase of personal property where only genuine buyers are in the fray. Speculative purchase is totally absent. For realty to be buoyant, developers see he need for speculative buying too.

Mr K. Ravinder Reddy, Chairman of Janapriya Engineers Syndicate Ltd., said “the real estate market is showing signs of picking up going by the recent demand for commercial property. Hyderabad is seen as an attractive investment destination for companies and individuals despite a few negative developments. Most believe that such disruptions are temporary and the fundamentals are pretty strong.”

“Compared with large metros such as Mumbai, Delhi, Bangalore and Chennai, rental values are low and becomes a compelling proposition for a company planning to set up say a 500-seater facility,” Mr. Reddy said.

The Chief Operating Officer of Lanco Hills, Mr S. Pochender, said “those who purchase for investment looking at speculative prospectsare totally missing from the market.”

“Significantly, one category of buyers who have worked in different cities in the country sees value in properties in Hyderabad compared with other markets. Theyare the ones open to buying new properties. But this is a small number compared with that of genuine buyers. Therefore, we have taken up another phase of construction, which has smaller size apartments,” Mr Pochender explained.

Margins under pressure

While the market is just recovering after the low of the last couple of years, the rising costs of inputs is now a major area of concern.

Mr M.P. Agrawall, Managing Director of Koncept Ambience that develops luxury homes, said that construction cost is heading northwards with growing wages and cost of inputs, it won't be long before builders consider some price hikes.

The prices have been stable after they hit rock bottom a few quarters ago. Already few players have jacked up prices by a couple of hundred rupees per sq. ft.

“While January-March showed positive signs in terms of number of enquiries and conversions, April-May may be considered disappointing. This could be because of transition to a new financial year where people tend to postpone purchases to a later date,” Mr Agrawall said.

“All markets across the country have gone up over the period but this is not the case with Hyderabad. In fact, prices have firmed up even in other cities in the State such as Visakhapatnam, Vijayawada and Rajahmundry,” he said.

Mr R. Kaushik, Director, Marketing at Lodha Developers, said Two of its properties in Hyderabad, one high-end and the other mid-market are doing well. But interest rate hike is some cause for concern.

The General Manager, Ramky Estates, Mr D.R.Patnaik, said “each time the market gets going, there is some disruption to the momentum due to one issue or the other. This has been the trend in the past few months. The market that was looking up as of February was impacted to some extent by the Telangana stir only to settle down again.”

“There is considerable pressure on pricing as costs have gone up both from inputs and from labour side. But people may not accept any price hike in the near future. But at the same time, it would be hard for the developers,” he said.

“We are also planning to launch a couple of projects shortly, including a large project near new international airport,” Mr Patnaik said.

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