Hyderabad in wait-and-watch mode

The Centre's decision earlier this week in favour of creation of a separate Telangana State is likely to have a significant impact on the real-estate scenario in Andhra Pradesh and Hyderabad in particular, according to industry players.

However, they have taken a cautious wait-and-watch approach in terms of assessment of the likely scenario. The issue of how the emerging metropolis of Hyderabad will take shape eventually is likely to have a major bearing on the overall sector outcome.

Some feel that if Hyderabad is hived off and becomes part of a separate Telangana State, the situation will be different as opposed to Hyderabad becoming a separate Union Territory, as many are demanding if a separate State is formed. Some others, who prefer anonymity in this rapidly changing business environment, say that the Telangana issue has been factored in already and they do not see much impact, like a further downward correction.


The President of AP Builders Forum, Mr C. Sekhar Reddy, said that the economic downturn, which resulted in twin blows of drop in prices and less liquidity, has led to nearly 30 per cent drop in prices. The issue of Telangana has been in the air for nearly four-five years and further downward revision is unlikely.

In fact, if one looks at the overall cost of any real-estate project, a third of it is accounted for by Central and State taxes, 40 per cent goes to construction and labour and the balance 30 per cent is for land cost and builders' margin after factoring in loans if any, Mr Reddy said, explaining that this leaves for very little flexibility.

Many of those who had booked properties, both apartments, and independent villas during the boom time, have done so keeping in view some speculative gains when property prices could go up.

As most of these projects have been either handed over or are in the process of being handed over to owners, this has potential to create more supply and also pressure on owners to get higher returns, according to one builder who requested anonymity.

Impact of uncertainty

The Chief Executive Officer of Lanco Hills, Mr S. Pochender, said “the overall development is being perceived as negative in the near term. While we don't see significant changes in the price structure, as it has already come down in the last year, this could have some impact on the overall off-take of new ones.”

The President of Greater Hyderabad Builders Forum, Mr S. Prabhakar Rao, said that the issue now is about the uncertainty the move to create a separate State is likely to cause. Businesses do not prefer uncertainty. They are happy if some decision is taken either way and then they carry on.

Any delay in taking a firm decision could potentially impact fresh investments and also buyer decision, Mr Rao felt.

Referring to new projects, Mr Reddy said that the focus of developers would be on completion of real-estate projects now under way and monetise them rather than venturing into new ones. The real-estate market is, in fact, just about shrugging off the slowdown impact. After the last couple of quarters that passed without any transactions, the enquiries had gone up with the support of lower interest rates and price correction.

Added to this, developers such as Janapriya Engineers Syndicate, Prajay Engineers, and a host of developers with affordable ventures, and Aparna Construction with its Value Housing project, and attractive discounts offered during the Dasara and Diwali festivals, added to buyer interest.

The recent development for separate statehood and uncertainty thereon would again potentially hit fresh interest, builders feel.

Referring to developers in the State from across the country, Mr Reddy felt “they have come here eyeing the business potential. Like any business that faces highs and lows, they will bear with it and continue till they see better times. One need not be too worried about initial reactions of some developers.”