Amaravati slowdown blessing for Hyderabad realty

At a time when real estate sector is going through 'slowdown and correction' in the country's major markets like Mumbai, New Delhi, Chennai and Bengaluru, the Hyderabad real estate market is shining beyond belief and expectations.

Land prices skyrocketed in last three years, registering three-to-four times jump in some key localities on the city outskirts.

Apartment sales zoomed and their prices appreciated. And the Hyderabad market still looks solid despite the latest signals that point at an overall economic slowdown in the country that borders on recession.

Hyderabad real estate market suffered between 2011 and 2014 due to a prolonged agitation for separate Telangana state. That was period when real estate sector boomed across the country.

The uncertainty continued for a couple of years even after the formation of Telangana and so some real estate players shifted their focus to Andhra Pradesh when the then AP government announced its plans to build world class capital called Amaravati on the banks of Krishna river between Vijayawada and Guntur.

Foundation for Amaravati was laid in October 2015. As the real estate market in Amaravati area failed to gain traction and there was delay in the construction of the capital, real estate players and investors who went to AP with big plans came back to Hyderabad as market in the City of Pearls started looking up thanks to proactive policies of the Telangana government.

However, the Amaravati market gained traction a few months before the Assembly election held in May this year. But this positive traction did not last long.

Young YS Jagan Mohan Reddy who led his YRSCP to historic win in the Assembly elections put the capital city plans on hold, alleging that people close to previous TDP government indulged in 'insider trading' and bought lands close to the capital city area as they had prior information about the location of new capital city.

This development put the future of Amaravati in limbo, pushing real estate sector in AP's new capital region into uncertain zone yet again.

But will the latest uncertainty in Amaravati real estate market benefit Hyderabad? Real estate sector insiders say slowdown in Amaravati will indeed benefit Hyderabad.

"There are enough and definite signals that people are coming back to Hyderabad in the wake of uncertainty in Amaravati.

It goes without saying that Hyderabad is the best option for Telugus if there is no other reliable and credible alternative," feels B Sunil Chandra Reddy, Secretary-General, Telangana Real Estate Developers' Association (Treda).

Pointing out that there is temporary slowdown in Amaravati, he says it will benefit Hyderabad real estate.

He is however hopeful the Andhra Pradesh government may initiate steps to revive the sector in capital region. "If that happens, the sector will come back on right track within three months," he says.

Reddy further explains that money and investment will go wherever investors and property buyers feel there is an opportunity. "Apart from Hyderabad, people may also look at Visakhapatnam and cities outside Telugu states.

But the biggest beneficiary will be Hyderabad if uncertainty reigns in Amaravati," he notes.

Chennuru Rakesh Reddy, Director, Aparna Constructions and Estates, also says that Hyderabad market stands to benefit from slowdown, if any, in Amaravati.

"To the extent of Hyderabad benefitting from a slowdown in Amaravati, Hyderabad currently looks more appealing from an end user perspective and hence will benefit," he said. Having said that, Amaravati will be an investment bet for the long run, he adds.

Hyderabad has been doing well for the last three years or so and will continue to do so, going forward, he further says.

"With the way the Andhra Pradesh government is talking, who will go there? Everyone looks for investment opportunities in real estate.

They go to those places which offer good growth opportunity," Gummi Ram Reddy, Chairman, Credai Telangana, and CMD of Ark Group, told The Hans India. "As a saying goes, hardships of some people benefit others. Hyderabad will benefit," he reasoned.

He further said that Hyderabad had been benefiting a lot because of slowdown in real estate sector in Bengaluru and Chennai. "Hyderabad market has a distinct advantage now thanks to sluggish markets elsewhere," he pointed out.

Arani Sumanth Reddy, National President, National Association of Realtors- India (NAR India), however observed that Amaravati is a small market and it's illogical to compare it with Hyderabad.

"Most of the people who bought properties in and around Amaravati hailed from Guntur and Vijayawada. Not many outsiders have invested in real estate there.

It was an artificial boom created by locals. There was no real boom even when the Chandrababu Naidu government was in power," he maintained.

He further stated that going by official statistics, there had been no largescale land transactions in Amaravati area. "People speculated about rise in land prices. The previous government also has a role in that," he said.

According to him, Hyderabad real estate market is getting investments from New Delhi, Bengaluru, Mumbai and other cities.

"Developers can't afford to sit back and relax if there is any recession or slowdown. They will look for opportunities elsewhere to survive the slowdown and wait for better days in their home markets.

Currently, Hyderabad is the better market in India. That's the reason why investments are coming here," he said.

C Shekar Reddy, Chairman, CII IGBC Hyderabad Chapter, said that slowdown in Amaravati would have some positive impact on Hyderabad market. "There will be some impact.

Otherwise also, people are investing in Hyderabad market which is doing well now," he added.

He however admitted that investors and developers rushed to AP when the then government there announced new mega capital plans. "Many of them returned to Hyderabad.

People who bought land in early days made some profits later. But people who bought lands at high prices saw their investment getting stuck," he explained.

Reddy further said that barring Amaravati, real estate market in Visakhapatnam and other cities in AP remained stable. "My view is that AP Chief Minister may come up with his own plan for capital city.

But the problem is AP doesn't have funds to spend on new capital city. However, it's better if new city is developed in AP as land is available there now," he felt.

Shekar Reddy, also former national president of Credai, suggested that government should focus on gradual growth of real estate sector.

"In Hyderabad, nearly 18,000 residential units are delivered annually. In Vijayawada and Visakhapatnam, it will be around 1,000 and 3,000 units a year respectively.

I pointed out this when the previous government announced plans to build 1 lakh houses in Amaravati capital region and told them that market there would not absorb that many units," he explained.

Narendra Kamaraju, founder of Praneeth Group, said that Amaravati area would be unviable for large projects. "I announced six years back that people who went to take up projects in Amaravati would eventually come back to Hyderabad.

Amaravati is small real estate market. There is no point in comparing it with Hyderabad market," he maintained.