Cautious optimism in Hyderabad

Real estate developers in Hyderabad have adopted a cautious approach to new projects though some prospective buyers have been showing sustained interest since January 2009.

With Government support to the real estate sector coming in the form of some lowering of interest rates by banks, there are early indications of a revival of the market after a tough 2008 fourth quarter.

However, builders feel that the Government can do a lot more to rekindle interest, which including bringing down the service tax imposed on residential property and enhancing the interest rate rebate further.

Industry players say that the focus now is on affordable housing and expanding the scope of their product offerings.

As builders have become cautious with regard to new investments, some feel that it will take a while for the plans to materialise.

The trends vary depending on the nature of property. Commercial property, in particular, is going through a rough patch. The general slowdown has seen rental values in various parts of the city falling.

The Managing Director of Aliens, Mr Hari Challa, is of the view that though buyer interest has been rising, especially in the last two months, the total number of transactions has come down.

The Managing Director of Lanco Infratech, Mr Venkatesh Babu, said that the market conditions are tough and the general economic slowdown has impacted every player in the sector.

“However, we need to distinguish between residential and office-cum-commercial space. The trends are different in these broad areas. In the residential space, we see continued interest, but buyers are seeking lower prices due to current economic conditions,” Mr Babu explained.

However, Mr Babu feels there is marked change in the commercial property space, with large developers adopting a wait-and-watch approach as demand has dwindled in the last two quarters.

But this could lead to another problem, that is, of short supply about 18-24 months from now, which will push up prices. This is particularly so for developers who have purchased land at high rates and are not taking up projects owing to pricing pressures.
Reducing costs

The Chief Executive Officer of Cybercity, Mr Uttam, said that the Government continues to be a big beneficiary of various taxes imposed on buyers. By reducing some of the imposts, it will significantly help bring down overall costs for buyers.

Cybercity is developing an integrated township with an investment of Rs 550-600 crore near Hyderabad. Mr Uttam feels that reducing the service tax on residential property, extending the ceiling limit of Rs 1.5 lakh on interest and hiking the benefits under Section 80 of the I-T Act, will encourage new property purchases.

With fear of job losses due to the slowdown in several sectors, especially information technology and financial services, there is a tendency to postpone purchases till the general economic environment becomes more stable.

The other aspect that is causing a delay in deals coming through is the fact that buyers expect property prices to fall further.