One Month of Demonetization: Hyderabad Realty inches towards Recovery

Witnessing political and economic crises before 2014, Hyderabad's realty market witnessed another low with the chaos over the demonetisation of currency notes. However, the state government’s plan to delay revising the market value of land and recent approvals of a few infrastructure projects restored the buyer’s trust and the real estate business in Hyderabad started showing the sign of recovery within one month of demonetisation. 

Unlike Delhi and Mumbai, Hyderabad is not driven by investors, but endusers. As per the experts, the investor population for the market is not more than 10 percent. The city used to have at least 20 to 40 percent of real estate payments through cash before demonetisation, right from the purchase of land and raw material to the sale of built-up houses and `bribing' officials for obtaining necessary clearances. Hence, premium project developers who pump in a lot of cash into their ventures hit the panic button. Deals for luxury housing projects, especially villas and resale flats reported a major chunk of payments being made through cash. These transactions were badly hit, even if only temporarily. 

Although some of the developers were worried about the slump in sales with the option to pay by cheques, Hyderabad was set for better times ahead. Many developers in the city used to lose a lot of business because they refused cash payments. However, with that option off the board, the industry started showing a sign of improvement in last a few days. 

Prices of flats witnessed no variation but those of resale flats and open lands came down 10 to 15 percent. Purchase of plots in a few areas that fall under Hyderabad Metropolitan Development Authority such as Medchal, Gachibowli and Keesara (which witnessed great business before demonetisation) have hit a new low. A broker from the city confirms that. “Before demonetisation, I was receiving at least 100 enquiries per month, but during last month this number went down to 80. The most lost opportunity are from the resale and land market,” However, fearing a further dip in revenue from the property registrations stream, the state government has dropped the idea of revising market value for property registrations this year. The move is expected to revive a land buyer’s positive sentiment towards the city. The rental demand remained unaffected in the areas that enjoy direct connectivity with IT and Pharma hubs.

Future Outlook 

According to a Cushman & Wakefield-Global report, Hyderabad is a prominent market that would be on investors’ radar, with the city expected to account for roughly 11 percent of the total under-construction Real Estate Investment Trust (REIT)-eligible Indian projects over the next four years. This, along with news of approval of Mega City project and Pharma City (in the outskirts of Hyderabad), is going to have a positive reflection on future housing demand. With the roll out of Goods and Services Tax (GST) and Real Estate Regulatory Act (RERA) in 2017, the price of real estate is expected to marginally go up or at least remain unchanged with limited new project launches. 

Cities which have multiple employment opportunities are the best options for homebuyers in the affordable segment. Thus, Hyderabad is expected to witness sustained demand for affordable housing projects in 3-4 quarters with no price correction. This is one of the reasons (other reasons being a limited number of project launches due to RERA and comparatively low inventory than other metros in the country) why developers are not expected to offer any special incentives to homebuyers as the city will not be flooded with distressed deals in the future.