In a downturn - How to call the bottom to the real estate market prices

Note: These observations are limited to micro markets around areas with strong employment potential. e.g. Domlur, Whitefields, Sarjapur in Bangalore and Kondapur, Hitec City, KPHB in Hyderabad. 

Banks usually allow for 85% of loan of total cost of the project, in the worst of the times they have brought it down to 75%. This broadly is a barometer to call the bottom of a market. In good micro market like above, you can start bidding your time for the right opportunity starting with prices coming down 15% and more. Ideally, if you can land a deal 20% below the earlier peak, don't think too much, just grab it. You never know when the market will turn and such deals will vanish. I see no point waiting endlessly to see the prices go further down and reach 25% from the peak.  I think, in India, 20% down in a good micro market is a buy signal.

And, for locations that are away from the business districts and have been boomed on speculation, even if they are down by 70%, don't touch them.

When can you try this prognosis next- I think 2017, but I see June 2014 also producing a scare, there could be some deals if you are constantly on the look out.  Homes are sticky to let go for the reseller so you have to be on the look out for months before you spot the deal.

Miyapur - Hyderabad micro market scan

Miyapur has very little social activity.  Though it has some 3/4 movie screens and good super market options, eating out options are pathetic. This is because there is not commercial activity and no colleges around to attract floating population through out the day. The fact that Miyapur is sandwiched between two very commercial locations in KPHB and Chandanagar, does not provide enough scope for commercial development.  But, with time the activity will eventually kick in. Given the situation and the wide use of the name Miyapur by the realtors, some caution is advised.

Miyapur, as quoted by builders, indicates an emerging micro market that encompasses - Bachupally, Mythrinagar, Madinaguda, Hafeezpet, Mathrusrinagar, Mayurinagar, HMT Swarnapuri, Ameenpur which expands the core Miyapur area by about 10 times. 

Like Gachibowli, Miyapur is used to broadly address all the above localities surrounding Miyapur, so one should be alert to the exact location because as you move away from NH 9 (JNTU - BHEL stretch), the livability quotient comes down drastically.  It is safer to bet on projects closer to NH 9 - inside 1 km from the highway. And, the metro is also running bang on NH 9. Gated communities can be a good options but individual apartment units might face challenges with respect to social infrastructure.  

Branding and Real Estate

A brand inspires lot of trust.  Real estate is definitely not the place to talk about branding because of the dubious mix of unprofessionalism (cheating), type of people in the business and general lack of awareness of the technical challenges in the industry.  Most of the real estate operators are financiers with no technical knowhow of the industry what so ever.

But, brands like My Home, Aparna (major builders) and Alekhya (specializes in small apartments but positioned as super premium) have built trust and loyalty with their patrons. And, are seeing the fruits of their hardwork. In a sluggish market like Hyderabad, they have been working extra hard and in the process have put in place the basic building blocks of great industry players.

At the national levels, marquee corporate brands like Godrej, Mahindra and Tata have brought a breath of fresh air to the industry.  People are increasingly depending on these brands (Chennai and Bangalore markets, that I am aware of) to avoid the usual heartburn associated with real estate deals. And, that is translating into pricing that is 6-8% above the next door projects' pricing.  And, I am coming across buyers who passionately argue that the premium is every bit justified. 

Hyderabad Real estate - Key Govt Acts - Buyers must know - GO 86, 2006

See the link

http://www.aponline.gov.in/Quick%20Links/Departments/Municipal%20Administration%20and%20Urban%20Development/Govt-Gos-Acts/2006/e-GO.Ms.86.2006.pdf

Hyderabad Real estate - Key Govt Acts - Buyers must know - GO 901, 2007 - BPS and LRS

See the link

http://www.ap.gov.in/Acts%20Policies/Regulation%20of%20Buildings%20Act.pdf

Job market in Hyderabad - Dull but growing

As in rest of India, Hyderabad job market has been dull. The political uncertainty has had an affect, but we can seek some consolation from the fact that the companies already in Hyderabad were extremely happy in the past 4 years.  One big reason is the low attrition as very few new companies have  set up shop.  Continuous flow of  new entrants would have unleashed a war for experienced talent.

Second reason is that in spite of on going agitations, not single day of work was affected. So, existing players have chosen to grow organically in Hyderabad surprising everybody.  Many of the existing companies have added staff on a regular basis. Deloitte is a great case along with Amazon. Deloitte is planning to consolidate all its office space into two massive 17 floor towers close to Ramky Towers.

There has been no new office place coming into the market in the last 5 years. (2013 and 2014 will see some additions). So, surprisingly, office space at Rs 55 per sft is on par with some of the IT park offerings in Bangalore.  Some IT parks in the East - North Bangalore are under Rs 50 per sft.

The office space market in Hitec City and Gachibowli has been kept busy with lot of companies moving from Banjara Hills and beyond to the IT parks.  Lack of parking spaces in old offices, deteriorating buildings, architecture not suited for current industry standards and lack of desired aura around the current location have prompted move from the core city to Hitec City side.  Over the years, most IT employees have started living in West Hyderabad. pushing the employer further to be in that part of the city.  

Hyderabad Discount

How much discount is Hyderabad offering due to the political uncertainty?

I tried to see what are the prices of residential properties in a 30 mins/ 8 km range from key IT parks in Bangalore. I chose Bangalore because in 2007, the prices in Bangalore were on par (marquee projects were 5% above Hyderabad projects).  The projects in Bangalore around Domlur, White fields are now quoting at 5,400 to 6,500 per sft where as projects in comparable locations in Kondapur Gachibowli belt are in the 3400 to 4500 per sqft range, so the Hyderabad discount is approx. 30%.