Hyderabad witnesses fall in Residential sales in 2013

The Hyderabad realty market went through a tumultuous phase in 2013, with the sales for housing units dropping by 4 per cent in 2013 compared to 2012, as per estimates by prominent realty consultant Knight Frank. As a result, the total number of residential units sold in the city in 2013 was only approximately 16,500. Besides, the fall in sales volumes, the number of new launches in the city also fell by 15 per cent to about 16,200 units compared to about 19,000 units that were launched in 2012. However, it is expected that the sales volumes will gradually pick up in 2014 due to the change in political climate due to the Telangana deadlock being resolved.

City-specific factors:

The prime factors responsible for this scenario were the imbroglio surrounding the bifurcation of Andhra Pradesh and the formation of Telangana. The realty sector of the city hit rock-bottom following the political ramifications due to the Telangana impasse. This led to speculations among buyers and investors that investing in real estate in the city was fraught with risks. Developers were also forced to shelve their residential projects due to the plunge in demand. Completed projects had to be sold at values at which their margins had to be compromised. This led to a scenario where there was a surplus supply for residential units compared to demand.

Country-wide factors:

The year 2013 was a gloomy year as far as residential sales across all major cities of India were concerned. The fall in sales volumes in Hyderabad was just a reflection of this country-wide phenomena, across all major cities. Besides the political implications surrounding Telangana, there were many other factors similar to other cities that also contributed to the fall in sales volumes. They include factors such as the slow economic growth, high inflation, hike in interest rates by banks, political instability etc.  However, compared to many other states like Mumbai, Delhi as well as IT/ITeS dominated states like Chennai and Pune, Hyderabad fared much better. Moreover, the drop in new project launches also facilitated the unsold inventory levels to stabilise.

Comparative analysis:

Inspite of the steady absorption levels for residential units in the city, there was no considerable change in values for residential units. Compared to all the other IT/ITeS driven markets in the country, Hyderabad has performed the worst with regards to the weighed average prices. The city has only seen a 13 per cent increase in weighed average prices since 2009. On the contrary, other IT/ITeS cities like Bangalore, Chennai and Pune have witnessed atleast 38 per cent increase in weighed average prices since 2009. According to a prominent realty report, among the seven major cities in India of NCR, Mumbai, Bangalore, Chennai, Pune and Kolkata, Hyderabad has some of the most affordable residential micro-markets in the country.

Telangana formation leads to revival:

With the Andhra Pradesh Reorganisation Bill 2014 being passed in both houses of Parliament on February 20th, 2014, it has paved the way for the statehood of Telangana. Moreover, the decision to retain Hyderabad as the shared capital of both states has been welcomed by realtors and investors in Hyderabad. It is expected that there will now be a revival in the real estate sector of the city due to the certainty with regards to the status of the city. It is felt that most of the unabsorbed units will be taken up by the end of 2014 or the beginning of 2015.