With Chandrababu Naidu taking over as the chief minister of Andhra Pradesh for the fourth term, there is expected to be greater emphasis on infrastructure and pro-business policies in both Telugu states, especially in the capital city Hyderabad. However, real estate experts say that given the resurgence of Amaravati, there may be some out-migration of businesses and residents to Andhra Pradesh, which could result in a temporary correction in Hyderabad’s real estate prices.
A day before he was set to be sworn in as Andhra Pradesh Chief Minister, Telugu Desam Party chief N Chandrababu Naidu had said that Amaravati would be the state capital.
As the first chief minister of the bifurcated state from 2014 to 2019, Naidu had proposed Amaravati as the capital city. Located between Vijayawada and Guntur, and spanning 29 villages, it was planned to be environmentally sustainable. Naidu had acquired around 30,000 acres of land from farmers for the construction of Amaravati through land pooling. But the plan encountered a major setback in 2019 as TDP lost power to the YSRCP.
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Real estate experts say the volume of residential real estate launches in Hyderabad may also rationalize as investors and buyers scout for competitive opportunities in Andhra Pradesh, given the focus on Amaravati, which is expected to witness a surge in development along the new growth corridors.
“While this dream project was shelved by the previous government, there are now very distinct possibilities of its revival. However, developments of a new capital city and the massive eco-system it entails is a task of epic proportions. Despite all political will and support, it will take time to fructify – and to emerge as real competition to Hyderabad,” said Prashant Thakur, Regional Director and Head – Research, ANAROCK Group.
Hyderabad’s real estate prices and launches – How the numbers stack up
According to data shared by Anarock Research, the average property prices in Hyderabad have increased by 45% 2021 and Q1 2024. As many as 2.18 lakh new homes launched and 1.54 lakh residential units sold in Hyderabad between 2021 and Q1 2024.
Hyderabad’s residential market has exhibited growth between 2021 and Q1 2024, with a cumulative total of approximately 218,800 new residential units launched and 154,300 units sold. The year 2023 witnessed a peak in activity, recording nearly 76,300 units launched and 61,700 units sold. This represents a significant increase of 48% and 143% respectively, compared to figures from 2021.
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Thakur said that property values in Hyderabad saw a substantial rise between 2021 and Q1 2024. On average, prices appreciated by 45%, reaching ₹6,350 per sq ft in Q1 2024 from ₹4,372 per sq ft in 2021.”
Land prices in Hyderabad had also appreciated by over 30% in the last three years. This had influenced prices rises across asset classes in the city, the Anarock Research showed.
West Hyderabad, the zone with the highest concentration of office spaces, has seen even stronger growth. “Average residential capital values in this region have increased by 52% in the same period. Currently, the average price per square foot stands at ₹7,200,” says Thakur.
“Andhra Pradesh’s potential development can be a double-edged sword for Hyderabad real estate. However, the overall impact is likely to be positive as Andhra Pradesh’s growth could spark a ripple effect, attracting businesses and investors to the entire region,” he added.
This could lead to increased demand for office and commercial space in Hyderabad, especially along key corridors like the Hyderabad-Vijayawada highway. This area is already being primed for development with infrastructure projects and industrial parks, making it a potential growth engine for Hyderabad real estate, he said.
Drastic decline in Hyderabad’s property prices unlikely
“Property price appreciation might be moderate going forward. However, a drastic decline seems unlikely, given the strong underlying demand,” said Thakur.
“Overall, the long-term outlook for Hyderabad’s real estate market remains positive. Nevertheless, national market trends and the evolving situation in Andhra Pradesh bear watching,” added Thakur.
The challenges ahead
While the real estate outlook for Hyderabad seems promising, there are challenges. Some out-migration of businesses or residents to Andhra Pradesh is possible, especially if AP offers lucrative incentives. This could draw some investments away from Hyderabad, leading to a temporary correction in Hyderabad’s real estate prices and a potential dip in the commercial real estate market, Anarock Research said.
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However, the presence of a large talent pool and developed infrastructure of the city, with enhanced connectivity, could make it difficult for companies to venture into a new state in the short term. While Hyderabad’s established infrastructure, strong IT base, and cosmopolitan character are unlikely to diminish significantly, the impact on the city’s real estate market will be influenced by how development unfolds in Andhra Pradesh, it added.
According to Ritesh Mehta, Senior Director, and Head (North and West), residential services and developer initiative, JLL India, despite the recent political developments, Hyderabad’s commercial real estate sector is poised for continued growth, driven by its well-established infrastructure, significant IT presence, and a large talent pool. The city’s strategic initiatives and enhanced connectivity make it an attractive destination for businesses.”
Hyderabad’s thriving job market contributes to sustained demand for quality housing. Overall, both the commercial and residential real estate markets are expected to remain resilient going forward, he added.
All about Hyderabad’s real estate market
Hyderabad is the nearest mega cosmopolitan centre for both Telangana and Andhra Pradesh and this makes it an attractive destination for the population of the neighbouring cities and towns. It is a preferred location for the people from Andhra Pradesh, as the city offers opportunities for higher education, employment, entertainment, advanced healthcare needs and shopping for special occasions. There is therefore a significant influx of housing buyers from the adjoining state.
Hyderabad’s real estate boom has strong fundamentals driving it. The city’s IT-ITeS sector, infrastructure development, and overall business ecosystem are likely to sustain demand for quality housing and commercial spaces, the Research showed.
The city’s economic activities are well diversified and not limited only to the services sector. There are also industrial, manufacturing and logistics sectors along with healthcare and education that drive the demand for real estate in the city.