Hyderabad residential prices rose by more than 5 per cent in 2015: JLL

The following is the report Anuj Puri, Chairman & Country Head, JLL India.

Known to be a market driven by end-user demand, Hyderabad has never seen runaway price escalations unlike some of the more speculative markets in India. The city’s residential market witnessed a price appreciation of 5.2 per cent (y-o-y) in 2015 and is expected to see a 4 per cent price rise in 2016.

A well-known IT hub, Hyderabad has been witnessing a strong demand for office space for some years now. Resultantly, the demand for homes in the city has also grown over the years – barring the period of political turmoil.

At the sub-market level, in 2015, western suburbs (HITEC City, Kukatpally, etc.) saw the highest appreciation at 15.4 per cent followed by the northern suburbs (Bachupally, Shamirpet, etc.) and eastern suburbs (Uppal, LP Nagar, etc) – both at 4.7 per cent. The prime sub-market (Banjara Hills, Jubilee Hills) followed at 4 per cent and finally, the secondary sub-market (Begumpet, Secunderabad) saw a price rise of 2.3 per cent.

Both developers and buyers are highly bullish on the western sub-market, which is the major driver behind Hyderabad’s residential demand-supply dynamics. Western suburbs contributed the maximum share to total launches and sales’ movement in the city. As this submarket saw large-scale expansion as well as fresh leasing by IT/ ITeS firms and other corporates, attractive returns could be expected in the upcoming housing projects. This has led to prices going up in this area.

Most of the recently-launched projects in the western sub-market are expected to address housing demand in the next 2-3 years, which in turn will be triggered by the heavy employment generation anticipated here. On the other hand, the prime and secondary sub-markets witnessed moderate appreciation due to their higher land costs, which was also complimented by the ongoing metro rail development – the first phase of which will commence in 2016.

The upcoming metro line led to price appreciation in the northern and eastern submarkets (only apartments) as well. Capital value appreciation of villas in the northern sub-market remained stagnant as only a few projects were launched and the demand remained tepid among buyers.

Certain pockets in the western sub-market like Kondapur, Narsinghi, etc. have outdone others in the number of new project launches due to locational advantages. There is a possibility of price rise slowing down in the western suburbs, given such a large volume of committed development being concentrated in one location alone. However, as established developers with a good track record operate here, there is only a slight possibility of demand falling down drastically.