Telangana stir worsens outlook for realty sector in Hyderabad

Where are all the morons who said that the Satyam/Maytas fiasco and now the Telangana agitation will have no impact on business and residential real estate ? 100 storey buildings in a city where land is abundant was the signal that Dubai and Hyderabad are no different when it comes to greed.

Hyderabad: Dotted with the sprawling campuses of information technology (IT) firms such as Microsoft Corp. and Wipro Ltd, Hyderabad’s fast-moving growth corridor—the Gachibowli area—looks skeletal with half-done buildings, yellow construction cranes and giant billboards that promise delivery of homes on time.

Skeletal buildings: One of the many incomplete realty projects in Hyderabad’s Gachibowli area. Bangalore is gaining from Hyderabad’s loss. Many real estate investors consider the Karnataka capital a safer bet. Madhurima Nandy / Mint


Hyderabad was hailed some years ago as one of India’s hottest property destinations, with firms such as US-based Tishman Speyer Properties and Malaysia’s Sunway City Bhd coming in to launch their maiden projects in the country.

In its present condition, Andhra Pradesh’s capital city remains the lone realty victim of the slowdown.

“Other cities are already on the recovery route. But Hyderabad has been in the news for all the wrong reasons,” said George Johnson, city head (firm management), Jones Lang LaSalle Meghraj, a property advisory.

The downturn perhaps shook Hyderabad more than it did other large cities due to certain disturbing events.

The first was the unravelling of a multi-crore accounting fraud at Hyderabad-headquartered Satyam Computer Services Ltd last January, followed by the death of chief minister Y.S. Rajasekhara Reddy in a helicopter crash in September.

And just as the sector was beginning to recover, the struggle for a separate Telangana state that includes Hyderabad, intensified.

“Whether the market bounces back depends on if they can control the Telangana agitation,” said N.R. Aluri, managing director, NCC Urban Infrastructure Ltd. “The residential segment particularly looks uncertain though we are expecting some demand in the budget category.”

City-based NCC Urban, a subsidiary of Nagarjuna Construction Co. Ltd, has moved its focus to Bangalore, where it is building four projects, compared with one in Hyderabad.

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Telangana effect on Hyderbad real estate

After the Satyam/Maytas fiasco, the crisis surrounding the bifurcation of AP and the creation of the state of Telanagana could be nail in the coffin for speculators in the Hyderabad real estate market. It is interesting that speculators will now swing towards Vizag, Vijayawada and Warangal as they exit the bubbling Hyderbad market. Land prices in Hyderbad have quadupled over the past 4 years but it appears that the T-factor has pricked the balloon faster then expected. Investment is never without risk and this has been proven yet again by the surprise events which can bankrupt even the savviest investor.

Here is a Times of India article which reports 20000 crores been invested in Hyderbad real estate by Rayalseema/Coastal Andhra politicians. I wonder where do they get these numbers from. Is there a survey carried out by Times which queries each politician and then adds up the figures ? So from the looks of this article it appears that politicians only care about real estate in Hyderbad, Telangana or AP doesn't matter.

Hyderabad Blues
A question of a Telangana without Hyderabad, those from Andhra and Rayalaseema declared the current state capital was common property and should be declared an Union Territory. The demands are based on a complex mix of political, emotional and material logic. Many politicians from the other two regions have invested heavily in property in and around Hyderabad including the ritzy Jubilee Hills, Hi-tec City and Shamshabad, areas where the outer Ring Road and new international airport
have come up and jacked up realty. Of the 23 AP districts, 10 are in Telangana, nine in Andhra and four in Rayalaseema. For the Telangana supporters, Hyderabad is the heart of the region and can never be given UT status. "By right, Hyderabad deserves to be the capital of the new Telangana state. Historically, all the Telangana districts have actually been part of the erstwhile Nizam-ruled state of Hyderabad of which the current city was the epicentre. If Hyderabad is shared with people of the other region, then the heart of Telangana is will be taken away," said one Congress leader from the region. Another reason for the Telanganites' opposition to Hyderabad being made a UT is lack of contiguity with other regions. "The state capital is surrounded completely by the Telangana districts. Therefore, for the people of Andhra and Rayalaseema regions, Hyderabad can never function as an administrative capital," said the leader. Those clamouring for UT status for Hyderabad base it on the cosmopolitan nature of the city. "To preserve its cosmopolitan character and accelerate its growth as an hub of IT, biotech, pharma and other emerging technologies, it has to be made union territory....The demographic profile of the city has changed tremendously over the years and today the native inhabitants constitute only a modest percentage with those from the other two regions, different states of India and abroad forming the majority," said BC welfare minister M Mukesh Goud in a letter to Congress president Sonia Gandhi on Wednesday, in which he urged her to declare Hyderabad as UT. But there are more material reasons for seeking UT status. Goud, who wrote the letter, is from Hyderabad. Health minister Danam Nagender, who also is an advocate of Hyderabad as Union Territory, is also from Hyderabad. According to sources, several ministers from the Andhra and Rayalaseema regions have invested in property worth crores of rupees over the last decade or so in and around Hyderabad. "They stand to lose heavily in case Hyderabad is retained with Telangana as property values are bound to fall," said an observer. Interestingly, when the Telangana issue was raging three years ago after TRS president K Chandrasekhar Rao parted ways with the Congress and launched an agitation, there was not much of a demand for Hyderabad as Union Territory. "That was because the real estate business was booming in the state and efforts were on to build a new capital for the divided Andhra state in the Mangalagiri-Guntur-Vijayawada region. Therefore, leaders of these regions had no objection to Hyderabad remaining part of Telangana. But after the real estate bust, the Andhra and Rayalaseema leaders re-invested heavily in and around Hyderabad. Their total investments here would be more than Rs 20,000 crore," said one politician in the know. As a result, the fight for Hyderabad is set to be fiercely contested. But with the Andhra regions up in arms a day after the Congress gave the green signal for Telangana, the Rosaiah regime tottering and the possibility of the assembly passing the resolution on Telangana becoming difficult, the fight for Hyderabad may just recede into the background for the time being. But it is sure to be raked up when Telangana inches towards becoming a reality.

Hindu reports

IT professionals worried over Telangana developments

Hyderabad, Dec. 10
The Chidambaram statement on the formation of Telangana State on Wednesday night created ripples in the IT industry in Andhra Pradesh.
The subject turned into intense discussion in most IT companies, with the employees discussing the pros and cons of division of the State. The industry employs about 2.5 lakh people, mostly from outside of Telangana region.
“It (the Telangana factor) would have a very bad impact on the IT industry. We won't get new companies here and the existing companies might cut down their operations here,” Mr K. Kunal, a HR consultant for a leading IT company, told Business Line.
A Managing Director of another IT company echoes this view. “I am neither pro- nor anti-Telangana. But what I would like to have is serenity which is the hallmark of the city. Customers are postponing their visits on hearing the news of violence,” he pointed out.
"The issue is not whether Telangana happens or not. The real concern is the loss of productive time in the last few weeks. We need to restore normalcy," Mr J. A .Chowdhary, Chairman of The Indus Entrepreneurs (TiE), said.
Mr C. Bhaskar, working for a telcom services company, has a different view. “This is just a temporary phase. Companies invest in places where they find the right eco system. The city could establish an eco system with good IT infrastructure and skilled manpower,” he argued.
“Now that there is clarity (on the issue), there will be no trouble for work and logistics. The worst is over,” he observed.
Mr T. Navin, working for a multi-national firm, said that some people were not bothered at all. “We have bought houses here and the status of the city is not going to change. Why should we bother?”
Exports
The IT exports from State were put at Rs 12,000 crore in the first half ended September, 2009, reflecting a flat growth rate as a result of the economic slowdown. It expected to reach Rs 35,000 crore in 2009-10 as against Rs 32,500 crore in the last fiscal.
There, however, is a silver lining for the IT industry. A real-estate developer admitted that the costs of properties would come down drastically. “For those, who wanted to expand their facilities, it is a good time as prices of realty have already crashed in the IT investment triangle being planned by the Government,” he said.

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