Why Hyderabad Is An Affordable Metropolis
Hyderabad is poised at an interesting inflexion point – today the city of Nawabs is one of the most affordable metropolitan cities, with all necessary ingredients to capitalise on an economic upturn and, thus, related real estate growth. While many prominent companies are setting up large office spaces in the city – giving others like Bengaluru and Chennai a miss – residential real estate prices in Hyderabad are extremely attractive for investors and end users when compared with other metro cities.
According to the latest PropTiger DataLabs report, 'North-West Hyderabad, Emerging Manufacturing Hub', apartments in the area are priced in the range of Rs 3,000 to Rs 3,400 per square foot (sq ft) , while villas are priced at Rs 3,900 to Rs 4,100 per sq ft. Barring a few luxury projects that have been launched in areas like Kukatpally and Kondapur, 90 per cent of the projects in this area are in the affordable-housing segment. The luxury projects in these localities are priced at Rs 8,700 to Rs 9,000 per sq ft.
PropGuide gives you a lowdown on why real estate prices in Hyderabad are not as high as in comparable cities:
The start-up city of India
When a political instability due to the Telangana issue hit the city, its real estate sector suffered a big blow, with a rising unsold inventory and drop in prices. Now, with the political turmoil completely resolved, the city has drafted policies around manufacturing, information technology and ease of doing business. This, in turn, has revived the investment and expansion plan of prominent companies like Google, Amazon, etc, which have been quick to identify the opportunity and set up large offices here.
Weak FSI restrictions
The Greater Hyderabad Municipal Corporation (GHMC) does not clearly stipulate floor space index (FSI) norms for buildings constructed in the city. Though the state government regulations impose certain restrictions, local authorities have placed no upper limit on FSI, to encourage construction of tall buildings in the city. This is one of the reasons why real estate in Hyderabad is affordable. When developers are allowed to build greater floor space, there is greater supply. When the supply is higher than demand, prices tend to fall.
Restrictions on built-up area
In Hyderabad, there are not many restrictions on the built-up area that can be constructed, except certain limits on setback. A setback is the distance at which a building is set back from street, river or any such structure. These restrictions, however, are quite stringent. Many experts argue that if such restrictions are repealed, housing in Hyderabad will become even less expensive.
A favourable regulatory framework
There are greater exemptions in Hyderabad on Value-Added Tax (VAT) , stamp duty and plan sanction charges. For example, according to the state VAT Act, developers are given tax exemptions if they opt for composition schemes in which they fully construct the apartment and then sell it. Registration charges and stamp duty in the city are lower than those in many other major cities. Registration charges are 0.5 per cent of the agreement value, and stamp duty is four per cent.
In fact, many experts believe that other Indian cities should emulate the Hyderabad model to ease real estate regulations and lower transaction costs.
However, with the political atmosphere in Hyderabad stabilising, real estate prices in the city are likely to see a surge in the near future. According to the DataLabs report, areas like Kondapur, Chandanagar and Tellapur have already witnessed a price appreciation of 10 per cent to 18 per cent in the 12 months to December 2015.
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