Hyderabad: Auctions of government land in prime localities of Hyderabad have yielded record prices, signalling a revival of investor interest in the city whose image took a beating due to the protracted movement for a separate state of Telangana.
Government land in Raidurgam, near the information technology hub of Madhapur in the city, fetched as much as Rs.29.28 crore an acre at an auction conducted by the Telangana State Industrial Infrastructure Corporation (TSIIC), a state-run agency for attracting industrial investments. TSIIC holds land parcels across the state, including in Hyderabad.
Drug maker Aurobindo Pharma Ltd was the highest bidder at the online auction on Wednesday, picking up five acres for Rs.29.28 crore an acre. Separately, the Hyderabad-based firm bought another 3.65 acres in the same locality, shelling out Rs.24.88 crore an acre.
Chief minister K. Chandrasekhar Rao’s office claimed the prices at the auction exceeded those during the boom years of 2007-08, when land prices in the city hovered between Rs.18 crore and Rs.23 crore an acre.
Land prices in Hyderabad fell sharply owing to the Telangana statehood movement that disrupted normal life between 2009 and 2014.
Uncertainty surrounding the division of erstwhile Andhra Pradesh led investors to rethink investments in the city. The real estate sector remained dull for some time even after Telangana was carved out of Andhra Pradesh in June last year.
Prices began picking up this year once demand for commercial office space went up, especially in the western part of the city where IT firms are located.
The high prices quoted by companies for commercial real estate in Wednesday’s e-auction will bring relief to the state government that has been trying to revive the city’s battered image.
But real estate analysts continue to be sceptical.
“Look at the profile of buyers,” Veera Babu, head of Andhra Pradesh and Telangana for real estate consultancy Cushman & Wakefield India Pvt. Ltd, said. “The e-auction was not able to attract a single national-level real estate developer. All the companies that offered high prices were from a non-real estate background. That is not a good sign for investors.”
Babu explained that high real estate cost may be good from the government’s perspective because it will result in more money flowing into the exchequer, but it will deter investors. Current rental values in Hyderabad cannot support the high land price, which is a major cost component of any real estate project, residential or commercial.
“If you look from the perspective of a private developer purchasing land at such exorbitant prices and renting it out, the Hyderabad market’s rental values are going up but they have not gone to the extent that the developers will be able to sustain operations,” Vasudevan Iyer, Hyderabad branch director of real estate consulting firm Knight Frank India Pvt. Ltd, said. “This (high investment) makes sense for people who want to make their own campuses… Private developers taking land, leasing it out and breaking even will take a lot more time.”
Among the firms who forked out top dollar for land are Naya Infra India Pvt. Ltd, a little-known company registered in 2014. It purchased two acres of commercial land for Rs.24.2 crore an acre.
Active pharmaceutical ingredient maker Symed Labs Ltd purchased three acres for Rs.22.02 crore an acre.
Even residential real estate is seeing record bids. Earth Pavers (Hyderabad) Pvt. Ltd, a manufacturer of pavement blocks, offered Rs.12.63 crore an acre for a residential land parcel in the Manikonda neighbourhood. Another firm, Gland Cellulose, bid Rs.6.05 crore an acre in Kokapet locality.
TSIIC issued a notification for the sale of 20 land parcels in Raidurgam, Manikonda and Kokapet localities last month.