Hyderabad: Hyderabad as a city has attracted investments in the IT sector, which has further fueled growth in the residential space and other asset segments. With large e-commerce companies setting up their centres in the city, warehousing sector is also growing gradually.
Telangana government is making efforts to make the State a major investment destination for manufacturing sector. The proposed Hyderabad Pharma City will become another major driver for office and residential space.
Stating the reasons why Hyderabad remains an attractive real estate destination, CBRE South Asia ED, Advisory & Transaction Services, India and Head- Hyderabad Operations, told Telangana Today, “Cost of living in Hyderabad is comparatively less. Rentals are lower. Availability of talent is another major factor that is working in favour of the city. Added to this, proactive government and its policies are creating conducive environment for investors to come.”
Statistically, upto 2015, the total Grade-A office absorption in the city was 3.5-4 million square feet (mn sq ft) annually. The next two years saw healthy absorption with numbers going to 7 mn sq ft each year. There is however demand-supply gap. Rentals have gone up to Rs 65 per sq ft. From 2020 onwards, approximately 30 mn sq ft of office space supply will be available in the city. Rentals will stabilise from there on.
Paul further explains, “Hyderabad has a large land pool. The city saw real estate growth moving across the city from Basheerbagh-Secunderabad-Begumpet-Banjara Hills-Madhapur-Nanakramguda to Kokapet. Efforts are on to decongest the growth around the IT corridor in the west to move towards Uppal in the eastern corridor. As micro-markets had been growing throughout the city, the rentals remained healthy. This made companies to come to Hyderabad.
Telangana government played an important role in attracting investments into the State with large companies committing huge office space including biggies such as Apple in the last three years.”
Since many people had been migrating to Hyderabad for their jobs and once they have stayed in the city for 2-3 years, they had been looking at owning a house. Residential space has been impacted positively. Implementation of RERA has given confidence to homebuyers.
Retail which was lull for some time is gaining momentum now with high street retail stores leasing pickling up. With the implementation of GST, demand for Grade-A warehousing also picked up. Large portion of warehousing few years back was Grade-B. Now, good quality warehouses of Grade-A standard have come up. They have moved from being ‘godowns’ to quality warehouses. They are on par with quality warehouses anywhere in the country, he observes.
He added, “There is still growth to come in the warehousing space in Hyderabad. With online shopping growing, though e-commerce giants have created one fulfillment centre already, they are going to create more in the coming years, across the city. They will also come out with small distribution centres operating their network in the city using hub-and-spoke model.”
Infrastructure is growing around ORR and towards Shamshabad airport. As newer locations keep emerging, there will be stability in the rentals. Another major advantage, he says, is the time taken in the decision making to opt for a particular location in Hyderabad unlike other cities where there needs a lot of brainstorming before deciding on the location. Today, western Hyderabad has become the hub of all growth. One does not require location strategy or demographic analysis in Hyderabad.
Talking of other factors, that are becoming a plus, he says, “IT companies along with the State government have created Cyberabad Security Council to ensure employee safety. This is very unique to Hyderabad and no other city has this kind of safety mechanism for the workforce. ‘SHE’ teams and patrol vehicle deployment has built in trust in the city that it’s a safe place to work and settle.”
On the near-term outlook, he says, in the next two years at least, the growth trend will continue. With absorption of 6-7 million sq ft every year, and with 30 mn sq ft of office supply to be ready by 2020, Hyderabad will see healthy business.
In future, the city will see more investments by lifesciences companies that will create more office space. With meetings, incentives, conferences and exhibitions (MICE) sector growing, hospitality sector will also grow. There is about 4-5 lakh sq ft of hospitality projects under development.