Hyderabad Is Now The Costliest Property Market In South India
A consistent increase in apartment values in Hyderabad since the bifurcation of Andhra Pradesh in 2014 has turned Hyderabad, what is popularly known as the pharmaceutical capital of India into the costliest property market in south India. Average apartment values in Hyderabad, once a paradise of affordable homes was Rs 5,318 as of December 2019, indicate PropTiger DataLabs numbers. This is slightly higher than the values in Bengaluru and Chennai, the other prime residential markets in south India.
Property prices in south cities
Average price psf as of December 2019
Net change in value over December 2014
Source: PropTiger DataLabs
Average property values in Hyderabad increased 47% after the state was bifurcated in 2014, when apartment values stood at Rs 3,607 psf, with the arrival of political stability after a prolong period of uncertainty. In 2014, average values in Bengaluru and Chennai were Rs 4,530 and Rs 4,832 psf, respectively. Even though India’s information technology capital underwent a double-digit price growth during this period, the appreciation is much less when compared to that in Hyderabad. Chennai saw the lowest price appreciation of only 8%, primarily because of high base price.
“If you look at the price trend in 2014, property prices in Chennai were slightly higher than even Bengaluru, where the IT revolution had already jacked up rates. Even though all prime residential markets in south India continue to show price appreciation, the price growth in Hyderabad has been possible because the base price here used to be quite low before- during the period of political unrest,” says R Vineeth, a Chennai-based real estate broker. “During the same time, Hyderabad also became a hotbed for luxury properties,” Vineeth adds.
Sales, launches seen declining across cities in south
Sales and new launches have been declining across markets and the three markets in the south are no exception. Numbers for the quarter ended October-December show sales fell 50% in Bengaluru, 33% in Chennai and 44% in Hyderabad, year on year amid a demand slowdown. A combined 12,542 homes were sold in these markets during the quarter ended December.
Launches started declining in these markets after the real estate law came into force in 2016, but started falling even more severely as sources of funding started drying up for cash-hit builders. Only 11,394 new units were launches in these markets during the quarter.
Hyderabad and Chennai developers, however, have lighter inventory burdens to deal with while Bengaluru builders would require nearly two and a half years to sell of the existing stock, taking in account the current sales velocity.
Sales in Q3FY20
Inventory as of December 2019
Overhang in months
Source: PropTiger DataLabs
Considering over 1.46 lakh housing units are lying unsold across these markets, buyers who are willing to purchase ready property would find plenty of options to pick from, especially in Bengaluru where 54% of the stock lies. However, a large part of unsold inventory in the three markets are units priced above Rs 45 lakh. Buyers enjoy higher deductions on their income tax if the property worth is below Rs 45 lakh. In this year’s Budget, the government extended the scheme to offer Rs 3.50 lakh as deductions on home loan interest for properties in that price bracket by another year (March 2021). Home loans for such properties, which fall under the affordable category according to the government-specified norms, are also cheaper.