HYDERABAD RESIDENTIAL TRACTION@GLANCE February 2014
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RESIDENTIAL TRACTION@GLANCE HYDERABAD RESIDENTIAL TRACTION@GLANCE February 2014 MARKET OVERVIEW NEW LAUNCHES ABSORPTION Hyderabad map RESIDENTIAL TRACTION@GLANCE FEB 2014 Market overview Hyderabad has witnessed weakened consumer sentiments that have yderabad is undoubtedly the affected the market deeply with no most affordable residential signs of recovery since the past two Hmarkets out of the country's years. Developers on the other hand top seven cities of NCR, Mumbai, have taken cues from buyer Hyderabad witnessed a Bengaluru, Chennai, Pune and Kolkata. expectations and have refrained from further slowdown in the The city has been known as the second increasing the prices. silicon valley of India after Bengaluru year 2013. Factors such as Like other residential markets in the and has emerged as an IT/ITeS and slow economic growth, country, Hyderabad witnessed a further biotech destination. Not only is it the slowdown in the year 2013. Factors rising interest rates by administrative, financial and economic such as slow economic growth, rising banks, high inflation and capital of the state but also the largest interest rates by banks, high inflation political instability among contributor to the state's GDP. and political instability among other A number of proposed infrastructure other factors have added to factors have added to the uncertainties. initiatives are expected to further fuel the uncertainties. Nevertheless, Hyderabad fared slightly the growth of the real estate sector in Nevertheless, Hyderabad better compared to other IT/ITeS Hyderabad city. Outer Ring Road (ORR), dominated cities of Chennai and Pune fared slightly better an eight lane expressway is being built with only a 4% drop in sales volume compared to other IT/ITeS in the city and work is in progress on during this time last year. A greater dip dominated cities of the last stretch between Shamirpet and in project launches helped the unsold Pedda Amberpet. A large part of the Chennai and Pune with inventory levels to stabilise. New ORR is already operational providing only a 4% drop in sales launches in Hyderabad have come good connectivity with Shamshabad volume during this time down from 19,000 in 2012 to 16,200 airport. The ORR provides a circular units in 2013 resulting in a fall of 15%. last year. connectivity with the city and helps in decongesting the Inner Ring Road and major arterial roads. Hyderabad Metro FIGURE 1 is also under construction, Phase I of YoY Change in Launches and Absorption the project will connect Miyapur and Launches Absorption LB.Nagar, Nagole and Shilparamanam, Chennai -35% -33% JBS and Falaknuma. Unlike the ORR, the Pune -34% -33% Metro cuts through the city connecting Hyderabad -15% -4% north with south and east with west in a linear manner. Besides, the proposed Source: Knight Frank Research Hyderabad Metro Rail Information Technology Investment Region (ITIR) is The fact that Hyderabad is an end user also expected to boost the real estate market having a latent housing demand development in the city. The ITIR would is substantiated by evaluating a trend include special economic zones for the of the past two years. A long term IT/ITeS sector, industrial parks, free analysis (8 quarters) of the moving trade zones, warehousing zones and average of launches and absorption export oriented units. clearly shows that the absorption levels have been more or less stable, whereas Despite having all the constituents in launches peaked in Q3 12 and have place for a successful real estate been trending downwards since then. market, the city has still not got its due. Even the short term moving average Hyderabad has been reeling under (4 quarters) confirms the trend. abundant uncertainties most of which Recognising the fact that buyers in the emerged due to political upheaval. As a Hyderabad market prefer completed result of this, the state of the market projects over under construction ones, has remained the same since the past developers are concentrating on five years. Largely an end user market, project execution. 4 RESIDENTIAL TRACTION@GLANCE FEB 2014 FIGURE 2 As of December2013 about 24% of the and around HITEC city and Gachibowli. Long Term (8 Quarters) Moving Average Trend Of Launches & Absorption total available units in the primary Supply in this micro-market has seen market remain unsold in the Hyderabad a boost due to its proximity to Launches Absorption 5,500 market. Although it is not quite high workplaces, upcoming retail 5,000 development and supporting 4,500 compared to other IT/ITeS driven 4,000 infrastructure in the form of connecting f Units markets, a healthy absorption rate is 3,500 No. o 3,000 required to bring it down and sustain railway stations, the National Highway 2,500 the prices. and Express Highway that connect to 2,000 the airport. Development in this region Q1 13 Q2 13 Q3 13 Q4 13 Q1 12 Q2 12 Q3 12 Q4 12 Q4 11 is moving southwards with developers FIGURE 4 Source: Knight Frank Research Index Of Real Estate Indicators showing interest in locations like New Launches Absorption Narsingi and Appa Junction. These Unsold Price locations are now perceived as the next During 2010-2012, nearly 54,000 160 growth corridors and are expected to residential units were launched in 140 gain traction in the coming years. the Hyderabad market. New project 120 100 launches peaked in the year 2011 alue (Base: 2010=1) 80 The northern zone is the second most and despite an improvement in Index V 60 preferred residential micro-market and demand the unsold inventory levels 2010 2011 2012 2013 Source: Knight Frank Research is driven due to good infrastructure inched up. facilities and proximity to the cantonment area. This region Hence, by the end of year 2011 the QTS In order to understand the market constitutes nearly 14% of the total (Quarters to Sell) ratio for the dynamics further it is important to under construction units in the Hyderabad market peaked at 9 study the city in parts. The Hyderabad Hyderabad market. Most of the supply indicating that unsold inventory will residential market can be broadly in the north zone has come up in take more than two years to get classified into five micro-markets,each Kompally, Qutubullapur, Nagpur absorbed. QTS refers to the number of of which has different characteristics, Highway, Yarpal and Shamirpet. quarters required to exhaust the price points and buyer profile. existing unsold inventory in the city. The eastern zone comprises locations Taking a cue from the piling unsold FIGURE 5 such as Uppal, Nacharam, Mallapur, inventory, developers sliced the Residential Micro-Markets Kapra, Cherlapalle, Pocharam, Kuntloor, in Hyderabad number of new project launches by Rampally and Ghatkesar. Nearly 10% of HMR- Central Begumpet, Banjara Hills, one-third in Q1 2012. This coupled with the total units under construction fall in a 20% increase in absorption brought Jubilee Hills, Panjagutta, Somajiguda this zone. Uppal remains one of the down the QTS to eight in Q1 2012. HMR- West Kukatpally, Madhapur, favoured destinations in this Post this the QTS remained stagnant at Kondapur, Gachibowli, micro-market. Phase II of the ORR, that Raidurgam eight till the end of Q3 2012. A flurry of is under construction will improve the HMR- East Uppal, Malkajgiri, LB Nagar launches in Q4 2012 pushed the QTS HMR- North Kompally, Medchal, Alwal, traffic situation and connectivity in the back to the Q4 2011 level of nine. This Qutubullapur eastern zone. has remained as is since the past five HMR- South Attapur, Rajendra Nagar, Shamshabad quarters, primarily due to a slowdown Malakpet, Attapur, Upparpally, in absorption. Source: Knight Frank Research Saidabad, Santoshnagar, Rajendranagar *HMR refers to Hyderabad Metropolitan Region and Shamshabad fall under the southern zone. With the development FIGURE 3 The western zone comprising locations QTS of Shamshabad International Airport QTS like Kukatpally, Madhapur, Kondapur, and other developments like SEZs, 10 Gachibowli, Miyapur, HITEC City, 9 Hardware Park and Fab City, this zone Gopannapalli, is the largest contributor 8 has been growing as a residential 7 to residential supply in Hyderabad. Of 6 location. However, its distance from the the total units under construction, the 5 city is still a deterrent to demand. western zone accounts for a significant Q1 13 Q2 13 Q3 13 Q4 13 Q1 12 Q2 12 Q3 12 Q4 12 Q4 11 share of around 60%. Demand in this Source: Knight Frank Research region is end user driven, majority catering to the employees of IT firms in 5 RESIDENTIAL TRACTION@GLANCE FEB 2014 Residential demand in the central zone New Launches sales due to the weakened consumer comprising areas like Begumpet, sentiments have refrained developers Maredpally, Somajiguda, Himayatnagar, from launching more projects. Most of Share of West Hyderabad in the overall Chikkadpally, Banjara Hills and Jubilee the project launches in Central new launches pie has been going up Hills is primarily driven by government Hyderabad took place in Banjara Hills, gradually with each passing year. Nearly officials, businessmen, corporate office Begumpet and Kavadigua in the price 11,000 residential units were launched employees and NRIs. These locations range of `7500-8500 per.sq.ft. in this micro-market during 2013 cater to higher income groups as well constituting nearly 70% of the new as the upper middle income segment. launches. Gachibowli, Kukatpally and Manikonda continue to remain FIGURE 7 At a micro-market level South Zone has Micro-market Split Of Launched Units the maximum unsold inventory. Despite preferred locations within this zone. in 2012 having prices in the affordable range These locations cater to the demand HMR- Central HMR- East HMR- North this market has failed to attract buyers. from the IT/ITeS sector, wherein HMR- South HMR- West Most of the projects with high unsold employees prefer to buy a house units are located in Rajendra Nagar and instead of staying on rent.