Political uncertainties in Andhra Pradesh over Telangana issue has hit Hyderabad's residential market hard.
Developers are sitting on unsold housing stock of 28% of the units launched during last 3-4 years, says a report by global property consultant Knight Frank.
"33,000 homes are unsold in the primary residential market of Hyderabad till June 30, out of 1,18,000 housing units that have been launched by the developers over the last 3-4 years," Knight Frank India Chief Economist and Director Research Samantak Das told PTI.
Das added that the growth in housing demand has been slower than the supply because of political uncertainties in Andhra Pradesh over demand for a separate Telangana state.
The consultant also said that it will take more than two years to absorb the current unsold inventory as the city has been taking longer time for absorption than other metros.
"Largely an end user market, Hyderabad has witnessed an extended slump due to the prevailing political uncertainties. Weakened consumer sentiments have affected the market deeply with no signs of recovery since the past two years," the Knight Frank report said.
Despite competitive capital values compared to other metros, the Hyderabad market has failed to pick up the anticipated pace. Political instability over the Telangana issue is the primary reason for this, it added.
Since the residential sector is highly sentiment driven, the Hyderabad market failed to attract buyers, it added.
According to Knight Frank research, Hyderabad shows the highest quarters to sell (QTS) ratio among the six metro cities. QTS refers to the number of quarters required to exhaust the existing unsold inventory in the city.
However, the consultants have found out that Hyderabad's residential market is showing some signs of recovery despite an extended slowdown.
"The residential sales volume has gone up by 11% in H2 FY13 compared to H2 FY12. Approximately 8,100 residential units were absorbed in H2 FY13," Knight Frank said.
Nearly 8,500 units were launched in H2 FY13, showing an increase of almost 33% compared to H2 FY12. Nearly 69,800 residential units are under various stages of construction in the Hyderabad market. About 70% of this is expected to be ready for possession by 2014 end.
On prices, the consultant said that although Hyderabad residential market has shown signs of revival in the past couple of quarters, rates have not appreciated much.
Prime residential locations like Jubilee Hills and Banjara Hills have seen an increase of about 7-10% during FY13 due to limited supply there.
Jubilee Hills and Banjara Hills command high capital values ranging between Rs 7000-7500 per sq ft, which is very high compared to other micro-markets. Western zone locations like Madhapur, Gachibowli, Kondapur and Kukatpally have seen price appreciation to the tune of 9% during FY13.
