Demand for office space in Hyderabad to be 5 million sft

“We are sure that Hyderabad will continue to see a demand for about five million sft commercial space per annum for some years to come,” Sunil Chandra said.

By   |  Business Bureau  |  Published: 23rd Oct 2017  5:45 pmUpdated: 24th Oct 2017  12:10 am
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Hyderabad: Hyderabad will continue to see demand of about five million sft commercial space a year. Though the supply has been lower than the average demand, the supply will increase next year as there are many projects that are under construction, according to real estate developers.

The city has been experiencing a near saturation on the office space front, particularly in the Hitec City and surrounding areas in the western part of city.

“Most estate markets witnessed heightened real estate activity between 2012-16. Hyderabad was an exception then. Part of it was due to the demand for achieving a separate Telangana. Once, the new State came into being, the Government has been proactive in initiating measures to boost the sector. The results will be seen in a year as most of the projects are under development at this point of time,” said Telangana Real Estate Developers’ Association (Treda) secretary general Sunil Chandra Reddy.

“We are sure that Hyderabad will continue to see a demand for about five million sft commercial space per annum for some years to come. On the supply side, things will improve in the second half of 2018,” he said.

A report from real estate consultancy this month said leasing activity in Hyderabad fell on a quarter-on-quarter basis. The available space was absorbed by IT/ ITeS corporates, BFSI and research, consulting and analytics corporates. Supply has increased in IT and extended IT Corridor and the rental values continued to grow across IT and SEZ developments.

A Knight Frank report ‘India Real Estate- Residential and Office (Jan- June) had said that Hyderabad office market witnessed transaction of 2.33 mn sft in the first half of 2017. This was approximately 26% lower than the office space transacted in the preceding six months and 15% lower than the office space transaction during Jan to June of 2016.

The report also said the dip in the office space absorption should not be seen in isolation as the period from July to Dec of 2016 had set a new high in the amount of office space transacted in Hyderabad. The fall in office space transaction was a result of paucity in supply of quality spaces coming into the market. Approximately 2 mn sft of office space was delivered during the first half of 2017, the report said.

Vacancy level in Hyderabad was around 9% which is lower than the level witnessed in the second half of 2016. Low vacancy is a challenge for the Hyderabad market as occupier interest continues. Vacancy levels in the most sought after locations such as Madhapur, HITECH City, Gachibowli and Nanakramguda are as low as 2–4%.

Treda president P Ravinder Rao said Hyderabad will continue to attract new buyers for its residential projects as the demand for commercial projects is on the rise. The infrastructure in the city including the Outer Ring Road and the ensuing metro rail will aid in increasing the demand.

GST, Real Estate and Real Estate (Regulation and Development) Act will result in the prices of properties increasing by about Rs 400-450 per sft. The builders will pass on the input tax credit they would claim in the GST to the endusers, he said. He, however, did not elaborate which building components would see an increase in the price and which would see a fall due to GST.