Hyderabad's realty sector will be on a growth path for next 10 yrs: Credai's Rajashekar Reddy

The ongoing Covid-19 crisis has crippled the real estate sector in several major markets across the country. But Hyderabad's realty sector continues to defy the trend and clock decent sales month after month and quarter after quarter despite the pandemic. "Continuous upswing in industrial, IT, pharma and agriculture sectors is driving the growth of the real estate sector in Hyderabad. The growth momentum will continue for another decade," V Rajashekar Reddy, General Secretary, the Hyderabad Chapter of Confederation of Real Estate Developers' Associations of India (Credai), tells Bizz Buzz in an exclusive interaction

How the Hyderabad realty is doing now?

For the past seven years, the real estate sector in Hyderabad has been on a continuous growth path thanks to proactive steps taken by the Telangana Chief Minister K Chandrasekhar Rao after the creation of Telangana State in 2014. The realty growth is clearly visible on Hyderabad's skyline which has undergone a transformational change in recent years. Further, Hyderabad attracted large-scale investments in the last three years. This is primarily because of innovative TS-iPASS (Telanagana State Industrial Project Approval & Self Certification System) policy announced by Telangana. The State registered steep growth IT and pharma sectors as well. These two key sectors generated a large number of new jobs. Last financial year also, Hyderabad's IT sector clocked a staggering 18 per cent growth from the previous year. The fact that Telangana attracted investments even during the pandemic goes on to prove the growth potential of Telangana. Besides, Kaleshwaram Lift Irrigation Project (KLIS) is also a game changer as it has fuelledthe growth of the agriculture sector in rural areas. Consequently, people living in rural areas are also buying properties in the city. All these factors are spurring the growth of the real estate sector in Hyderabad. The sector continued its growth trajectory even during the Covid pandemic.

How long the current growth trajectory of Hyderabad's real estate will continue?

We expect the growth momentum in this sector to continue for another 10 years. We are bullish in the long-term because the manufacturing sector has generated a large number of jobs for semi-skilled and unskilled people. As a result, there will be a decent pick-up in demand for affordable housing units in the coming years. Developers are also focusing on such projects. Though some projects have been launched with unit sizes of around 2,000 sft, most of the developers are focusing on apartments with sizes around 1,000-1,200 sft which generally cater to the affordable segment. Apartments with price tags of around Rs 50 lakh will hold the future for developers. Further, the proposed Regional Ring Road will also drive growth.

There seems to be more inventory coming into the market now. Will it change the demand dynamics in the city?

Yes, more inventory will come into the market now. Moreover, a greater number of investors are now buying properties in Hyderabad compared to previous years. Earlier, only 30 per cent of buyers used to be investors, with remaining 70 per cent being end users. The ratio has drastically changed now with investors accounting for nearly 60 per cent. These investors will also tend to sell their properties, leading to a further increase in inventory levels. The twin factors of increase in fresh inventory levels and sales from investors, may lead to a temporary fall in sales growth for a year or so. But it will be transient in nature and the Hyderabad real estate market will continue to grow for next year 10 years.The city will be in a different league in a decade if the political stability continues. I am dead sure about it.

Land prices are skyrocketing in and around Hyderabad these days.If this continues, Hyderabad may lose its affordability tag which has been driving the growth till now. Will that not hamper the growth of the sector in the city?

Thanks to rise in demand for new properties, land prices have gone up steeply. That's an undeniable fact. But land prices will not come down immediately. Instead, they may go up further. However, there may be some correction after a year or two.

Is the uncertainty over the Andhra Pradesh capital city helping the sector in Hyderabad?

Businessmen and investors always look for growth prospects. People from the Amaravati area are investing in the Hyderabad real estate, especially on lands, as there is some uncertainty in that State. But Hyderabad is attracting realty investors and companies from other parts of the country as well. Developers from other cities like Prestige, Purvankara, and Salarpuria Sattvaalso launched their projects in the city.When it comes to Andhra Pradesh, the idea of three capitals is innovative. Some ideas fuel development that is not visible. For instance, the creation of new districts in Telangana has a major impact on the real estate sector with new cities and towns turning into district headquarters. Many thought this decentralisation of administration would fail. But it's a success story at most places.

There is no limit on FSI (floor space index) in Hyderabad. Many experts say this will put enormous pressure on basic infrastructure in areas like Kokapet where several skyscrapers are coming. What do you have to say?

It's a fact that Hyderabad's skyline is changing. The vertical growth of any city is a signal of its rising prosperity and development. But there should be some restrictions. Even the Telangana government is thinking on those lines. From our side, we are also asking for caps on the FSI. It should be done gradually and restricted to some zones. The government can't implement such restrictions immediately in areas like Kokapet where some people bought lands from the government recently. But we should move in that direction to reduce pressure on the infrastructure. The ideal one is to develop around 1 lakh square feet of space in oneacre of land, not more than that. But there is another angle as well. The unlimited FSI is attracting investors to Hyderabad. So, we need to strike a balance.

There is some controversy with regards to the sale of undivided share (UDS)of land. How do you react to it?

The UDS schemes are most dangerous. Customers will land in trouble if such projects are not completed. So, Credai Hyderabad took the initiative to curb it and even issued notices to 10 developers who launched such projects. The State government also acted swiftly, issued a circular against such projects, and stoppedthe registration of properties sold under UDS schemes. Customers should buy properties only in RERA-approved properties. Customers will be at fault if they buy properties in those projects which are not approved by RERA.

Recently, the Telangana government enhanced property registration charges and property valuesat a time when some other States reduced registration charges to help the sector. Don't you think increased registration charges and land values will push down sales?

Last year, Credai Hyderabad has requested the State government to reduce registration charges by 2.5 percentage points to rev up property sales during the pandemic. Maharashtra reduced the charges. That led to increase in sales in that State. But our proposal was not accepted.

However, revised land values may not impact apartment buyers as government values are still lower than market values and most of the apartment buyers avail loans. It may impact transactions in rural areas and those related to commercial spaces. However, revised registration charges will leave a burden on property buyers. It will have some impact. But the government also needs revenues.

The Telangana government had initiated measures to encourage the city's growth in all directions as most of the development is coming up in the western part of the city. But there is not much traction in the East and other areas…

It will happen gradually. A lot of development is happening in Medchal, Kompally areas. These areas will see more development as an IT park is coming up in Medchal. Moreover, trends are changing as people are keen on living in peaceful places. As a result, the sale of villas has gone up by 15 per cent in a year. As time goes by, the city will expand in the eastern side and other directions.