 "Upsurge in office space absorption to drive housing demand in Hyderabad")
The upsurge in the office space activity was able to keep the housing sector recovery hopes alive despite the disappointment associated with the delay in the launch of the Metro Rail early this year, they said.
With an 84 per cent growth in net office space absorption for the January-September period in the last calendar year, Hyderabad has joined the fastest-growing markets in the country in office leasing by adding 3.87 million sft, according to a report from global real estate consultant firm Cushman & Wakefield. The average deal size here increased 28 per cent to 18,400 sft, the report stated.
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The increased activity has resulted in a sharp rise in office rentals from Rs 40-41 per sft seen a year ago to Rs 47 now. Tracking this, vacancy levels have dropped to the lowest 4-5 per cent currently across all prime locations, said real estate consultant JLL.
“We would not be surprised if the rentals touch Rs 50 per sft soon,” said Sandeep Patnaik, managing director of JLL, here. With so much of activity, the most-preferred financial district has become very congested now, he added. While other metros in south like Chennai and Bengaluru have multiple corridors allowing corporate houses to expand, Hyderabad has very few options in this regard.
According to him, the market here would gather more steam as three IT & ITeS companies were in advanced stages of discussions to float a request to clinch a large chunk of space in the coming months. It must be noted that e-tailer Amazon has recently closed a deal for acquiring 300,000 sft of space near Shamshabad. Other major player Flipkart, too, has gone in for around 250,000 sft for its back-end operations at Medchal near here, while Swedish retailer Ikea has announced an investment of Rs 500 crore in Hyderabad.
In its report, Cushman said office rentals values in the suburban Gachibowli market may appreciate marginally during the April-June quarter, as the upcoming supply is likely to be introduced at higher rentals. Limited availability of quality office spaces in Madhapur may also push up demand in Gachibowli, it added.
Considering all of this, the technicals for residential market are looking very bright and would be in a “sweet spot” in the next two to three quarters, they said.
While residential property prices have remained stable in the last two years, developers could raise them in the near future.
Speaking to Business Standard, Jayashree Kurup, head of content and research at real estate portal MagicBricks, said buyers here were looking for a further drop in interest rates to hit the market, and added “buying sentiments are not down”. In their research on consumer sentiment, it was observed that users here did not say they would not buy property. Magic Bricks expects residential prices to rise after Dussehra this year.
“For the first time, we are noticing interest from private equity players in the city housing market. With considerable development activity taking place in Madhapur and Gachibowli, we expect housing prices to rise in the next five to six months,” said Veera Babu, office head Hyderabad, Cushman & Wakefield.
According to data compiled by Cushman for the first three months this year, housing sector capital values have remained stable. It had noticed a 3-6 per cent price appreciation in the prime Banjara Hills and Jubilee Hills locations, when compared with the corresponding period last year. The average price per sft in these two locations stood at Rs 7,000-10,000 during the period. Developers launched around 3,300 new units during the aforesaid period and a majority was in Gachibowli, Madhapur, Sainikpuri, Miyapur and Kompally.
City developers are yet to witness the pre-2008 record boom for housing units. According to sources in the real estate market, housing developers here are finding it difficult to cope with the high cost of financing, and are not considering hiking rates in the near term.