With big-ticket investments fueling Hyderabad’s real estate market, land prices in the city have witnessed an exponential increase in the last few years. The prices have escalated by almost 100 percent in some of the key areas, especially along the IT Corridor of Hyderabad, which has emerged as the most expensive market in South India, leaving the two most prominent cities, Bangalore and Chennai, behind.
Led by government stability and robust growth of commercial and residential real estate, select areas in Hyderabad, especially the pockets along the IT Corridor, have reported staggering land prices over the years. This, in turn, has taken a toll on the quantum of investments, particularly from global commercial investors in the West corridor. Reportedly, a few areas in Hyderabad, such as Kukatpally, Ameerpet, Banjara Hills, Miyapur, and the city’s Madhapur Financial District-Gachibowli stretch have witnessed land prices escalating to the tune of 100 percent in recent times. Due to the proximity to Hyderabad’s IT Corridor, land prices in Kukatpally have reached almost Rs 48-58 crore per acre, whereas, the per sq ft price is over Rs 5,000 per sq ft. While land rates in the Madhapur-Gachibowli stretch vary between Rs 45 crore and Rs 50 crore per acre, the costs are the highest in the posh residential addresses of Banjara Hills and Jubilee Hills, amounting to Rs 87-90 crore per acre.
The steep rise in the land prices has disrupted the deals that were on the verge of closure, thereby putting a brake on investments from leading developers. As averred by Mahesh Khaitan, Director, Salarpuria Sattva, “The cost of land in HITEC City is as much as Rs 60 crore per acre. With the substantial increase in the cost of construction over the years, it has become almost impossible to purchase land in Hyderabad.”
What led to the massive price rise in Hyderabad?
Buoyed by investor-friendly policies and infrastructure development initiatives of the Telangana government, several renowned companies expanded their operations in Hyderabad in the last few years. The presence of several international brands, coupled with an increase in office space investments, helped generate immense employment opportunities in the city. This, in turn, led to a rise in the demand for residential apartments and plots in Hyderabad, especially in the last two years. As per a report by JLL, investments in Hyderabad surged more than five times and reached nearly Rs 10,000 crore between 2015 and 2019. The auction of clear-deed open plots, held by Hyderabad Metropolitan Development Authority in 2018, further contributed to the price growth in areas such as Madhapur, Boduppal, and Attapur. Cash-rich owners and lack of an alternate IT corridor, unlike the other major cities, such as Bangalore, are some other reasons behind the skyrocketing land values in Hyderabad, particularly towards the West.
As per Samson Arthur, Branch Director, Knight Frank, Hyderabad, “Locals in Hyderabad consider land as an appreciating asset and fancy this as the best possible form of investment. The sentiment strongly resonates with NRIs and syndicate-buyers, too. Similar is the case with migrants who see land as an attractive investment option despite the ongoing COVID-19 conditions. The majority of buyers cite Hyderabad as an emerging and favourable destination amongst key cities of India. This is visible in the outskirt retail investments, especially in plotted sales.”
Speaking further on the matter, Arthur adds, “Land rates are determined by Floor Space Index (FSI), which is highly unrestricted in Hyderabad as compared to other cities. With a strong organic demand from anchor industries and availability of abundant land in the western corridor, the price of land can be justified. However, the same does not hold true for other regions where land is limited and prices are not cheap. End-users such as the IT companies have not taken serious interest in these regions despite attractive rental rates. This is one reason why development is skewed towards the west-south corridor. While there are several economic factors behind the growth of the housing and office sectors, the unreasonable land rates have risen out of speculative sentiments.”
Sharing specific details about the land prices in some of the posh localities of Hyderabad, Samson avers,”Besides being the plush upmarket for the elite, the reason for property prices to remain high in Jubilee Hills and Banjara Hills is the lack of large land parcels. However, investing in these localities at such an expensive rate is a non-viable proposition for the developers as they can use similar amount to invest in the IT Corridor and develop with a much higher FSI, as compared to Banjara Hills and Jubilee Hills. Due to the availability of small land parcels and resultant height restrictions in Banjara Hills and Jubilee Hills, the developers cannot undertake high-rise projects in these areas. The ratio of potential development from city centric locations to the growth corridor is over 4-6 times. FSI utilisation is the only way to justify high land cost in areas such as Raidurg, where land prices are over Rs 50 crore per acre. Similar is the case with Financial District, Nanakramguda and Kokapet where deals have been quoted between Rs 32 crore and Rs 40 crore per acre. While there is demand for land parcels in these areas, FSI regulation by the government alone can regulate the development. Moreover, infrastructure development needs to be evenly spread across all regions. The LEAP and GRID policies of the government are intended in this direction.”
While Hyderabad is one of the most sought-after cities for investing in residential and commercial real estate, escalating land prices are indeed a cause of concern, especially in the West. To break the monopoly, the city needs to have better infrastructure facilities and growth options in other regions, including the micro-markets towards the East and the North. Moreover, to push sales, the owners need to bring down the prices to a considerable extent so that it is feasible for the developers, as well as the investors, who at present are refraining from investing beyond a certain limit.
