Hyderabad: Dotted with the sprawling campuses of information technology (IT) firms such as Microsoft Corp. and Wipro Ltd, Hyderabad’s fast-moving growth corridor—the Gachibowli area—looks skeletal with half-done buildings, yellow construction cranes and giant billboards that promise delivery of homes on time.
Skeletal buildings: One of the many incomplete realty projects in Hyderabad’s Gachibowli area. Bangalore is gaining from Hyderabad’s loss. Many real estate investors consider the Karnataka capital a safer bet. Madhurima Nandy / Mint
Hyderabad was hailed some years ago as one of India’s hottest property destinations, with firms such as US-based Tishman Speyer Properties and Malaysia’s Sunway City Bhd coming in to launch their maiden projects in the country.
In its present condition, Andhra Pradesh’s capital city remains the lone realty victim of the slowdown.
“Other cities are already on the recovery route. But Hyderabad has been in the news for all the wrong reasons,” said George Johnson, city head (firm management), Jones Lang LaSalle Meghraj, a property advisory.
The downturn perhaps shook Hyderabad more than it did other large cities due to certain disturbing events.
The first was the unravelling of a multi-crore accounting fraud at Hyderabad-headquartered Satyam Computer Services Ltd last January, followed by the death of chief minister Y.S. Rajasekhara Reddy in a helicopter crash in September.
And just as the sector was beginning to recover, the struggle for a separate Telangana state that includes Hyderabad, intensified.
“Whether the market bounces back depends on if they can control the Telangana agitation,” said N.R. Aluri, managing director, NCC Urban Infrastructure Ltd. “The residential segment particularly looks uncertain though we are expecting some demand in the budget category.”
City-based NCC Urban, a subsidiary of Nagarjuna Construction Co. Ltd, has moved its focus to Bangalore, where it is building four projects, compared with one in Hyderabad.
NCC’s signature project, a 400-acre mixed development on Hyderabad’s outskirts in Tellapur, in a joint venture with Tishman Speyer India, has been put on hold. Its only ongoing project in the city, Nagarjuna Residency in Gachibowli, has been cropped from 12 blocks to six.
Following the 1990s’ IT boom in the city, Hyderabad’s realty market reached its peak between 2005 and 2007, with rising land prices triggering a wave of speculative buying.
Property consultants say the key problems with Hyderabad have always been its unplanned real estate growth, demand-supply mismatch and steep land prices.
In 2007, for example, a consortium of developers bought 5.8 acres in the city’s posh Jubilee Hills area for Rs58 crore an acre. The project, which hasn’t been launched yet, would need to sell at Rs15,000 per sq. ft at least to be viable, said a property consultant, who didn’t want to be named.
“Everyone was buying large land tracts and planning big projects. Most projects launched in the last two years are nowhere near completion,” said P. Premkumar, member, AP Real Estate Developers Association.
Premkumar’s firm, Doyel and Co., part of Opus Developers and Builders Pvt. Ltd, is building Sunway Opus Grand with Malaysia’s Sunway City. The Rs1,700 crore township in Hitec City, a technology hub in Hyderabad, was announced in 2007 but construction hasn’t started yet though bookings have begun. It will have luxury homes and is Sunway City’s maiden project in India.
Yap Chun Hua, chief operating office of Sunway Opus, refused to talk about the project citing company policy.
According to Jones Lang LaSalle Meghraj, around 5 million sq. ft of commercial space in the city is expected to come into the market in 2010, of which a little more than 3 million sq. ft is likely to be absorbed.
Many buildings that were supposed to be operational in 2009 are still under construction, it added.
S. Pochender, director and chief executive of Lanco Hills Technology Park Pvt. Ltd, a mixed-use project in Hyderabad, said the Telangana struggle ripped apart the local property market in December, just when the city was seeing green shoots of a revival.
Around 400,000 sq. ft earmarked for office space in the Lanco Hills project is yet to find takers, after five-six nearly-finalized deals fell through in December, he said. Around 2 million sq. ft of retail space, including a 14-screen multiplex, is also going slow. “We have closed 60% of bookings for the homes, the rest is still there.”
Jones Lang LaSalle Meghraj’s report says only 0.72 million sq. ft of retail space in the city will be launched in 2010, and demand will be dormant.
Bangalore, some 550km from Hyderabad, has been gaining from Hyderabad’s loss. Not surprisingly, many investors want to exit projects in Hyderabad or delay investment commitments.
Nervous of getting stuck, Naresh C. Reddy, an independent investor, who also runs his own pharmaceutical business in Hyderabad, exited from three premium housing projects in the Madhapur area in the last week of November, when the Telangana movement was gathering steam.
“I made a loss compared to the initial investment that I had made in mid-2008. But I am now talking to builders in Bangalore because I think the city is safer to invest in,” said Reddy.
Irfan Razak, promoter of Bangalore-based Prestige Estates Projects Pvt. Ltd, said he, too, has put on hold a villa project in Hyderabad, originally planned for a 2009 launch.