Published On: Mon, Sep 29th, 2014

5 Ways Why Investors Should Continue to Invest in Hyderabad

Ever since Vijaywada has been declared as the new capital of the ‘residual’ Andhra Pradesh, there has been a shift in dynamics of real estate industry in the region.

After Telangana was separated from Andhra in June, the remaining state took the shape of the Andhra State created in 1956. Vijaywada has become the next venue of the “real estate Gold Rush”.

It is expected that this historical city along the Krishna river will see appreciation in land prices unlike ever before. The landscape which hardly comprises of high-rises is expected to be dotted with them in the coming years.

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This has sent jitters down the spines of builders and land owners in Hyderabad. The Nizam’s city has been the epicentre of development for the past two decades. Ithas seen a transformation from a historical city into a world class business destination. But now the focus has shifted to Vijaywada. How would it impact the future development of real estate in Hyderabad?

 

The Long Term Answer

Hyderabad is to Andhra Pradesh what Mumbai is to India. It is the commercial capital which generates almost two thirds the revenues of the erstwhile Andhra Pradesh(including Telangana region). This percentage will automatically be higher for the new state.

It is true that Vijaywada will also witness property development, however the investment in Hyderabad for future development is already quite high. For example, the Outer Ring Road is witnessing growth in real estate- both commercial and residential. This means that there are pockets for commercial establishments, campus-style office spaces and residential accommodations. Even though there has been a slump in the real estate market in the past year, the city is set to witness cautious, yet consistent growth. Here are the reasons why:

  • The supply for the current financial yearis less than that of last year. In turn, the availability of apartments in the following year is anticipated to be less than this year. In 2013, approximately forty thousand residential units were made available for sale. This has been an effective method to counter the slowdown in demand and keep the selling prices tied to a stable market price. Hence new flats for sale in Hyderabad are not expected to be economically priced leading to profits.
  • It has been anticipated that Hyderabad city will witness 5% to 8% sustainable year-on-year growth in the coming five to six years. If the first half of 2014 is any indication, the growth might be even be higher!
  • With the introduction of the new real estate bill in winters, the markets would consolidate even more across the country. All these factors portend stability in the near future and hence investment in Hyderabad will yield good ROI.
  • The flats for sale in Hyderabad carries a lesser price tag when compared to other cities in the country. This is partly due to the fact that Hyderabad witnessed a slump from 2008 to 2011 due to political instability locally and through 2012 due to political instability at the centre. As a result, the builders have had a huge inventory pileup which they intend to clear as soon as possible. However new projects would sell at par with the market in the coming years.
  • There will be no slowdown in sales of commercial spaces due to infrastructure development along the Outer Ring Road and construction of Hyderabad Metro. New SEZs have been granted the same benefits as their predecessors.
  • There are still large tracts of land in the peripheral regions of the city. Improved connectivity is set to increase the demand for development of these areas.

In Conclusion

Hyderabad is not a foregone investment option. A shift in the market focus is not enough to eliminate the future prospects of one of the most heavily invested cities of the country.