Will Hyderabad's Commercial Real Estate Assets come at par 'price wise' with those in Mumbai and Delhi someday?
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Question
Dear Rahul,
Do you see Hyderabad coming up to prices like Mumbai or Delhi in terms of rentals (commercial) as well as land area pricing within the city limits mainly focusing on the heart of the city?
Secondly I personally feel Hyderabad has potential and infrastructure but due to the political instability it is under valued , how ever isn't this the scenario through out India but Hyderabad gets hit more how come?
Thanks,
Mohit Verma - Accord Building Services
Hyderabad
Thanks,
Mohit Verma - Accord Building Services
Hyderabad
Answer
My first response is to ask 'what are you looking at exactly?' Percentage of ROI or the sale / rental values. In any investment opportunity you could have a very high lease or capital value and yet the ROI may be quite low.
As an investor (and not as a builder) an ROI ranging between 9 to 12% at the entry level is considered to be good for commercial properties. So are you getting that kind of ROI in Hyderabad? Knowing Hyderabad market, I know for sure that it is possible to get 9%.
Also you need to know that in places like Mumbai and Delhi your investment sizes are much larger whereas in Hyderabad it so much smaller. So you need to define your game. Small or larger ticket size.
And to answer if rates in Hyderabad will be as high as in Delhi and Mumbai ever? Hyderabad may probably take at least two or three decades to be on par with the real estate rates in Delhi and Mumbai. As you may know real estate prices are directly linked to the local & national economy, political stability and availability of land for expansion. Delhi & Mumbai has been politically stable for many decades now.
Mumbai has no more space left, so its growing vertically, plus Mumbai has better employment opportunities compared to Hyderabad hence the real estate rates will be higher. It will continue to remain high for some more time and over a period of time the high rates may not be sustainable in Mumbai.
Also you need to know that in places like Mumbai and Delhi your investment sizes are much larger whereas in Hyderabad it so much smaller. So you need to define your game. Small or larger ticket size.
And to answer if rates in Hyderabad will be as high as in Delhi and Mumbai ever? Hyderabad may probably take at least two or three decades to be on par with the real estate rates in Delhi and Mumbai. As you may know real estate prices are directly linked to the local & national economy, political stability and availability of land for expansion. Delhi & Mumbai has been politically stable for many decades now.
Mumbai has no more space left, so its growing vertically, plus Mumbai has better employment opportunities compared to Hyderabad hence the real estate rates will be higher. It will continue to remain high for some more time and over a period of time the high rates may not be sustainable in Mumbai.
Also you need to consider that Mumbai could be a city that's beginning to die. It may no longer be able to attract the kind of investment it once did especially due to its high real estate rates. What does Mumbai have to offer today that other states in the country cannot offer? Other Ports in the country are better equipped and are bigger. The Airports are swankier, better infrastructure and the cities may be able to offer a lifestyle that's equivalent to Mumbai. And top of it all, in other port cities, the availability of land is high and cheaper or even better, sometime it comes free!!!
Mumbai port is old, limited berths, mafia controlled and extremely crowded.
Delhi is similar to Mumbai in terms of employment opportunities. It is also the seat of power & administration so high rate of employment will continue for a very long time. Plus UP and Haryana can offer 1000s of acres of land for expansion. It is a win win situation for everyone in Delhi.
Hyderabad has the critical mass to fuel progress and yes 1000s of acres of land and extremely cheap. We have all the ingredients for now especially now that the UPA 2 trying to push through the Telangana State Bill with Hyderabad as its capital in the parliament, the rates are expected to grow at about 20% every 6 months. It may be higher if the ruling party in Telangana post the formation, joins the coalition at the centre.
Telangana issue was indeed a pull down factor and now that it is settled, the rates will start moving up. If you want to buy property this is the time to do so. If you want to sell, do it 9 months from now.
Mumbai port is old, limited berths, mafia controlled and extremely crowded.
Delhi is similar to Mumbai in terms of employment opportunities. It is also the seat of power & administration so high rate of employment will continue for a very long time. Plus UP and Haryana can offer 1000s of acres of land for expansion. It is a win win situation for everyone in Delhi.
Hyderabad has the critical mass to fuel progress and yes 1000s of acres of land and extremely cheap. We have all the ingredients for now especially now that the UPA 2 trying to push through the Telangana State Bill with Hyderabad as its capital in the parliament, the rates are expected to grow at about 20% every 6 months. It may be higher if the ruling party in Telangana post the formation, joins the coalition at the centre.
Telangana issue was indeed a pull down factor and now that it is settled, the rates will start moving up. If you want to buy property this is the time to do so. If you want to sell, do it 9 months from now.
Cheers,
Mr. Jagadishwaran G - Managing Director Helix Infrastructure Consultants (P) Ltd.
Mr. Jagadishwaran G - Managing Director Helix Infrastructure Consultants (P) Ltd.
Hyderabad
A very heart felt thank you to both you gentlemen for taking out the time and engaging all of us in such an amazing conversation. We look forward to many more such interactions, right here on IREFD.
With best regards,
Rahul Mishra
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