Bulk land sales take a hit as Hyderabad realty in slow lane

In yet another sign of slowdown in Hyderabad real estate sector which has enjoyed a 'golden run' in last three years, bulk land sales have hit slow lane in the past few months, with some industry insiders pegging the sales fall in this space at over 30 per cent.

Developers and serious real estate players buy land in bulk for their future use. Land bank owned by some real estate companies runs into hundreds of acres and they keep on accumulating land whenever there is an opportunity.

Such lands are used for developing layouts and real estate companies monetise the land by selling open plots or independent houses in such layouts.

Individuals also buy bulk lands for investment purpose and offer them for joint development by real estate companies or go for resale.

With the sales of open plots falling on account of slowdown and due to enormous rise in prices, business activity in bulk land deals has also come down drastically.

"It's true that there is not much activity in bulk land sales in Hyderabad in the past few months. Going by the land registrations data, transactions in this space have come down by over 30 per cent this year compared to last year," a senior executive from a real estate consultancy firm told The Hans India.

He requested not to be quoted as he is not authorised to speak to the media.

He blamed skyrocketing land prices for fall in the sales. "With steep rise in prices, land has become unaffordable now. Land which cost Rs 50 lakh per acre earlier is now priced at Rs 3 crore.

So, buyers are not keen on putting their money on land now as they feel there may not be much appreciation in near future," he said.

According to him, this will have an adverse impact on open plots business. "Entrepreneurs buy land in bulk, do the plotting and sell small plots of 200 to 300 square yards to individual buyers and small investors.

This cycle will obviously break when there is slowdown in bulk land sales," he explained.

He however added that the impact would be felt only a few months down the line, not immediately. "With talk of slowdown and economic downturn, small investors are also not keen on buying open plots at this juncture," he observed.

N Jaiveer Reddy, Managing Director, Ashoka Developers & Builders, also admitted that sales of large land parcels came down significantly.

"Prices went up as people started buying big land parcels. Policies announced by the governments also led to fall in sales in this space," he said.

Reddy further said that buyers slipped into 'wait-and-watch' mode in the wake of growing talk about the economic slowdown. "Some feel that prices will come down due to economic downturn. So, they are not buying now," he said.

According to him, real estate companies buy one or two land parcels in a year. "We also buy land parcels, but not frequently. We do that once in a year or so," he said, pointing out that as big companies are entering into Hyderabad market, small players are moving out.

J Venkat Reddy, Managing Director, AV Constructions (India) Private Limited and General Secretary, Telangana Builders Federation (TBF), also observed that there was a short-term recession in the sales of bulk lands.

"There is a stagnation. But this situation will not continue for long. This segment will also be back on growth track soon," he said.

The TBF leader however said that open plots sales had not come down. "Open plots segment is doing well as everyone wants to own a house," he said.

Saying that real estate sector is going through cooling-off period, Ashutosh Bishnoi, MD & CEO, Mahindra Mutual Fund, said buying land is not an easy business proposition now as prices have gone up.

"Real estate sector got overvalued across the country as lot of cash came into this space in the early part of this decade.

People overvalued the sector completely," he said, adding it's not advisable to buy bulk land at high prices. "People have learnt lessons in this aspect," he said.

Every large city has three to four years of surplus stock. Investor demand comes in only after all this stock is sold, he added.