Hyderabad Real Estate - The New Growth Corridor

“What do you need to make a colony habitable? You need schools, hospitals and the necessary social infrastructure. Parents can go to work anywhere,” quipped a developer eulogising the benefits of staying in and around Kokapet, a south western suburb of Hyderabad. What he stated is so true when one considers the situation in most major metros. Most individuals travel for at least an hour, one way, in major metros like Delhi and Mumbai, largely because of high real estate costs close to their office, to reach their place of work but prefer a robust social infrastructure close to their home. At a different level the information proved more than handy. A closer look at the growth of the city and it becomes evident the future growth story of the erstwhile city of Nizams is going to be in locations like Kokapet, Narsingi, Appa Junction along the outer ring road and Tellapur. While these areas have seen new launches of residential projects in the recent past, and Kokapet in particular, what will increase the attractiveness of these micro markets, going forward, is the fact that further new developments in the city, driven largely by office space, is headed in that direction, thereby making the concept of “walk to work” a reality. Thus, it would not be wrong to call these micro markets as the future flag bearers of the real estate boom in the city.

The history

When the real estate boom started in the city, it was largely concentred in areas along Madhapur and HITEC City. Gradually, the boom spread to areas like Gachibowli, Kondapur, Manikonda and other areas. Residential buildings slowly started to come up in and around the office buildings in these locations and with the passage of time these areas became “THE ADDRESS” for anyone who wanted to own a house in the city. However, as it happens in any city, the stars of the present soon fade away and make way for newer stars. This is what is happening in Hyderabad, albeit at a much faster pace.

The same old story

It’s a proven fact that the office market is the major driver of other verticals of real estate and the same old story is being repeated in Hyderabad. Lack of quality office space and drying up of new supply is driving occupiers to look beyond old war horses like Madhpur and HITEC City. This, to a great extent, explains the reason for locations like Gachibowli, Nanakramguda and Financial District making their presence felt in the office market of the city. What these new locations offer are new quality office space at competitive prices and most importantly, multi-tenanted buildings, something which Madhapur does not offer. Also, the new office space in the city is largely still coming up, in locations like Raidurg, Nanakramguda, Financial District and to some extent in Gachibowli. These locations should hold on to their coveted positions as “THE OFFICE ADDRESS” in Hyderabad, but it will not be for long. It also needs to be remembered that it is not cheap to own a house in these locations. Capital values in micro markets like Gachibowli and Kondapur are already between Rs.5,000–5,500 per sq ft. Also, certain sections of these micro markets are slowly starting to witness traffic snarls, especially during peak office timings. Thus it will not be long before these locations too make way for the new doyens of real estate in the city.

The new growth areas

It is only a matter of time before occupiers start looking for new office locations in the city and they have already started looking at micro markets beyond Gachibowli and Nanakramguda. If one looks closely at office transactions in H1 2018, 29% of the transactions that happened in the peripheral business district (PBD) west happened in Kokapet, an area that is largely known for residential real estate in the city. Not so long ago this area was home to villas catering to the cream of the society but with the passage of time it came to be dotted with high rises. Further, developers who operate in Kokapet have already started work on residential units beyond Kokapet, in locations like Tellapur. While the boom in the residential real estate in these locations has been on an upswing for a while, prices are still within reach. To give an example, the capital values of residential units in locations like Kokapet, Narsingi and Tellapur are still within the range of Rs.4,000 to 4,500 per sq ft. In addition, these locations already have the necessary infrastructure that will be able to cope with the real estate boom, at least for the midterm.

What makes them special?

While they are certainly the future of real estate in Hyderabad, they are special, even in the present day. So what is that they have? As already stated, the capital values are still within reach. Second, one can drive to office locations in West Hyderabad from these micro markets in 15–20 minutes, even during peak office hours. And once offices start to move to these locations, the drive will be even shorter, thanks to the excellent infrastructure that they have. Further, even in the present day, they have some form of social infrastructure, which basically means they do not become ghost towns at night and one can get help in case of an emergency. Third, future office development will be happening, in and around these locations. Last but not the least, these locations are close to the airport. So it makes perfect sense for occupiers and homebuyers to look at these locations, especially when prices are still affordable. Among other reasons, Gurugram is a glaring example of the benefits a micro market can reap from being closer to the airport.

Conclusion

To check the veracity of what the developer had told us, we drove around Kokapet and we discovered that there are functional international schools, hospitals and markets. It is always beneficial to hitch on to a star when it is rising instead of having it when it is at its zenith.