Andhra Pradesh’s four-term Chief Minister Chandrababu Naidu is expected to prioritize business-friendly policies and infrastructure development in both Telugu states, especially in Hyderabad, the state capital. However, real estate experts suggest that with the revival of Amaravati, there might be some business and residential migration to Andhra Pradesh, potentially causing a short-term correction in Hyderabad real estate values.
Amaravati's Resurgence
Just before his official swearing-in, Naidu reaffirmed Amaravati as the state capital. Originally envisioned as a sustainable city spanning 29 villages between Vijayawada and Guntur, Amaravati’s development involved land pooling of approximately 30,000 acres from farmers. The project, however, faced significant setbacks after the 2019 change in government.
Real estate experts anticipate that the renewed focus on Amaravati, projected to experience a surge in development along new growth corridors, may lead to a rationalization of residential real estate launches in Hyderabad. Buyers and investors may seek competitive opportunities in Andhra Pradesh.
“There are now compelling signs that this fantastic project might be resurrected, even though the previous administration abandoned it. On the other hand, creating a new capital city and the enormous ecosystem it requires is a huge task. It will take time to materialize and become a genuine rival to Hyderabad, even with all the political will and support,” stated Prashant Thakur, Regional Director and Head of Research at ANAROCK Group.
Hyderabad Real Estate Market Trends
Launches and Prices
Data from Anarock Research reveals a 45% surge in Hyderabad's average property prices between Q2 2021 and Q1 2024. During this period, Hyderabad witnessed robust activity with 1.54 lakh residential units sold and 2.18 lakh new homes launched.
The Hyderabad residential market flourished from Q2 2021 to Q1 2024, registering sales of 154,300 units and the launch of approximately 218,800 units. The year 2023 marked an all-time high with approximately 76,300 units launched and 61,700 units sold, representing a significant increase of 48% and 143% respectively compared to 2021.
According to Thakur, Hyderabad property values saw a remarkable 45% increase, rising from Rs 4,372 per sq ft in 2021 to Rs 6,350 per sq ft in Q1 2024. Land prices in Hyderabad have also appreciated by over 30% in the last three years, influencing price increases across all asset classes.
West Hyderabad, a major office hub, has experienced even more accelerated growth, with residential property values increasing by 52% during the same period. The average price per sq ft in this area stands at around Rs 7,200, as per Thakur.
Andhra Pradesh's Growth and its Impact on Hyderabad
While Andhra Pradesh’s growth may present both opportunities and challenges for Hyderabad real estate, the overall outlook remains positive. Andhra Pradesh’s development could attract foreign investment and businesses to the entire region, boosting demand for commercial and office spaces in Hyderabad, particularly along key routes like the Hyderabad-Vijayawada highway, which is currently undergoing infrastructure development.
Hyderabad Real Estate Outlook
Price Predictions
“In the future, there may be modest increases in property prices. But considering the robust underlying demand, a sharp decline seems improbable” said Thakur. “The future is generally bright for Hyderabad’s real estate market. Thakur also emphasized the importance of monitoring Andhra Pradesh's progress and national market trends.
Challenges
Potential challenges for Hyderabad’s real estate market include possible out-migration of businesses and residents to Andhra Pradesh, particularly if the state offers attractive incentives. This could lead to a short-term correction in property values and a potential slowdown in Hyderabad's commercial real estate market.
However, Hyderabad's established infrastructure, skilled workforce, and connectivity may deter some businesses from relocating. While Andhra Pradesh’s growth will undoubtedly impact Hyderabad's real estate sector, the city's strong IT industry and multicultural environment are expected to remain resilient.
Ritesh Mehta, Senior Director and Head (North and West) of residential services and developer initiatives at JLL India, believes that Hyderabad’s commercial real estate market will continue to grow, supported by factors like robust infrastructure, IT presence, and a talented workforce.
Hyderabad’s strong job market also sustains the demand for quality housing, contributing to a positive outlook for both the residential and commercial real estate sectors.
Hyderabad's Allure
Hyderabad, as the most accessible mega-cosmopolitan hub for Telangana and Andhra Pradesh, attracts people from nearby areas seeking opportunities in higher education, employment, entertainment, healthcare, and shopping. This has led to significant property purchases by residents of Andhra Pradesh in Hyderabad.
Furthermore, Hyderabad’s real estate boom is driven by strong fundamentals such as expanding infrastructure, a thriving business ecosystem, and a robust IT-ITeS sector. Beyond the service sector, the industrial, manufacturing, and logistics sectors also play vital roles in shaping the city's real estate market dynamics, alongside the healthcare and education sectors.