Hyderabad realty recovering

Published on May 09, 2015 00:20:12 AM
Hyderabad residential segment witnessed launch of nearly 3,300 residential units during the first quarter of 2015, nearly thrice the previous quarter. About 98 per cent of new unit launches were in the north-west quadrant of the city, mainly Madhapur and Gachibowli. This quadrant remained most active in terms of new unit launches and construction activity.

As compared to the previous quarter, rental and capital values largely remained stable across submarkets. However, high-end segment capital values in Banjara Hills and Jubilee Hills appreciated by 3 per cent and 6 per cent, respectively, from the previous quarter, due to limited availability amidst high demand. Mid segment capital values in Jubilee Hills, Madhapur and Gachibowli also appreciated marginally by 1-2 per cent, due to continued demand emanating from IT-ITeS professionals employed in the nearby office hubs.

According to a latest report by Citibank, the commercial real estate market witnessed an influx of 1 msf of office space in 1Q 2015, of which 65 per cent was in Grade A developments. Grade A net absorption declined by 36 per cent to around 0.6 msf at the end of this quarter. Whilst overall vacancy for the quarter declined by 0.6 percentage points to 17.6 per cent, Grade A vacancy in Suburban Madhapur submarket increased marginally by 0.5 percentage points and was noted at 5.4 per cent.

This quarter also witnessed limited transactions and hence, mall rentals remained stable across all sub-markets and overall mall vacancy levels remained stable at 7 per cent. Limited availability of quality spaces in malls led to spill-over of demand to main streets and subsequently healthy leasing activity was noted in main streets such as Jubilee Hills, Kukatpally and Chandanagar. The demand primarily emanated from apparels and F&B retailers. Despite healthy leasing, main street rentals remained stable from the previous quarter, across the city.

High-end segment capital values may appreciate marginally in Banjara Hills and Jubilee Hills in the next quarter. Mid segment capital values in submarkets such as Banjara Hills, Jubilee Hills, Madhapur and Gachibowli may witness marginal appreciation due to sustained demand and availability of good offerings at competitive prices. Nearly 2.6 msf of supply infusion is expected in the upcoming quarter. Rental values in Suburban Gachibowli submarket may appreciate marginally in the next quarter as upcoming supply is likely to be introduced at higher rentals.

Limited availability of quality office spaces in Madhapur may result in heightened demand in Gachibowli. With no new supply addition and limited availability in existing malls, rentals are likely to remain stable in the next quarter. Rentals across most main streets are expected to remain stable in the upcoming quarter as leasing is expected to remain steady. However, access related issues in specific micro-markets such as Raj Bhavan Road / Somajiguda may be a reason for waning retailers’ interest, which may lead to lower demand and subsequently lower rentals.