Hyderabad realty fared poorly in the last 2 years: Samson Arthur, Knight Frank India

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The real estate sector, in the city, fared poorly especially in the past two years, primarily because it took time for the state to gear up for the policy initiatives.

It is possibly the 3rd year in a row of an upswing in the real estate sector of Hyderabad. And yet, each of the last few years saw a large, unexpected, meteor-of-sorts that hit the market. Demonetisation, Real Estate (Regulation and Development) Act, 2016 (RERA), Goods and Services Tax (GST) and now the advanced elections in the state. If not for these meteors, ‘blowing cold’ was unlikely.

The first half of the current year wasexcitingfor the most part. In comparison, the previous two years of 2016 and 2017 had a more cautious start. By the second half of 2018, all the necessary systems and process were put in place, albeit a bit late, thereby paving the way for sector to take off. The ongoing festive season, which typically is the busiest season for the real estate sector, should have ideally lifted the sector from where it started. However, the outlook does not look exuberant but a pronounced calmness.

The positives

The real estate sector, in the city, fared poorly especially in the past two years, primarily because it took time for the state to gear up for the policy initiatives. By January 2018, personnel who would be involved in running the authority started getting appointed and by end August 2018, the website of the Authority came into being. Since then the website has been open for registration. The deadline for completing the registration ends in November 2018. It has, however, been reported that there are some teething problems, with the website, and there have been requests to extend the deadline for registration by another two months i.e. till January 2019. Registrations have started, on the website, albeit at a low rate but going forward we feel that as the minor glitches are ironed out things will only improve, and this should give the necessary fillip to the real estate sector in the city. While things had been looking up for the real estate sector in the city, the wind seems to be blowing in a different direction on the ground.

The ground reality

Even though all the necessary factors for the real estate sector, in the city, to move to next level seems to be in place, the sector seems to me missing the fizz this time around. It can be understood that new launches, in the present moment may have slowed a bit, because developers are facing some glitches, in getting their projects registered. If that is the case, then it is only a minor glitch and going forward, it will be sorted. About sales, Hyderabad has typically seen healthy sales. While new launches nose-dived as the sector tried to grapple with the new policy initiatives by the government, sales of residential units remained steady. During the first half of 2018, sale of residential units in the citycrossed 8,000 units for the first time, post formation of the new state. Surprisingly this festive season, the urgency seems to be missing. While there have been advertisements trying to attract homebuyers, that has only been in the form of freebies, nothing spectacular. We feel that the fizz is missingthis festive season and that the is largely because of external factors.

External factors

State elections in Telangana are scheduled for the first week of December. While the elections will be a test for the incumbent government, the occurrence of an important event like the state elections has meant that all other issues take a backseat. The elections will decide who is going to form government in the state, and for now other concerns do not matter much. A more pressing issue which may affect the sector, not only in Hyderabad but across major markets in the city is the crisis among the non-banking finance companies (NBFCs). With NBFCs in a spot of bother, projects could face rough weather with high cost of lending rates and a non-exuberant sales velocity.

On the whole, this Diwali may not be as bright as it used to be for the real estate sector, in the city. At best this festive could be a mixed bag. This, however, is a passing phase. The more pressing problem which has the potential to derail the recovery of the real estate is a combination of market drivers and macro-economic factors.

While IT companies continue their impressive run for the office realty sector, the cascading effect of residential market is yet to catch up. Political stability at State and Centre enable markets to operate freely. There is much hope for the new state of Telangana’s realty sector soon as the election verdicts are out and business resumes. Until then homebuyers would be wise to keep a look out for their choices even as Developers continue to relentlessly increase their footprint across real estate asset classes in Hyderabad.

[This is an authored article by Samson Arthur, Branch Director – Hyderabad, Knight Frank India. All views, opinions and expressions are personal and limited to the author.]