Hyderabad real estate has been booming for many years. Ever since the Financial District and Gachibowli gained an international look with skyscrapers, roads, and other aesthetic improvements, property prices have been skyrocketing.
While the market seems promising, the question remains: what is the boiling point for these prices?
A significant portion of the investors in these areas are high salaried techies and NRIs, who invest either for present living or future living or with plans to return to India eventually. Others buy properties for their parents and family members who live in Hyderabad.
As long as the properties are intended for personal use and to enjoy life, this is fine. However, if elite gated community flats are bought solely for investment purposes, they may not yield substantial profits at the time of sale.
Let's examine the latest scenario in and around the Kokapet region. Projects like Gravva and Nishada by My Home are priced at around ₹11,600/- and ₹12,300/- per square foot, respectively. Apas, another venture by the same developer, is priced at ₹10,300/- per square foot. Iris by Rajapushpa Constructions is priced at ₹13,500 per square foot, and Casa Luxura by Rajapushpa is around ₹13,000/- per square foot. The average price of gated community flats in this region is currently around ₹12,000/- per square foot.
The marketing teams claim that these prices will touch ₹20,000/- per square foot in the next five years. However, let's break this down. If the current price is ₹12,000/- per square foot, and we factor in additional costs such as parking charges, floor-based price differences, miscellaneous fees, and registration charges, the effective price could reach around ₹15,000/- per square foot. Buyers need to consider this final possession price.
Even if the price reaches ₹20,000/- per square foot after five years and the property is sold, the seller will have to pay a tax of 20% on the earned profit. After adjusting for inflation and indexing over five years, the net profit may be minimal, and in some cases, the investor might even incur a loss. Rent earned over the five years could be a mitigating factor.
However, if an NRI buys the property with a bank loan, it could be an unwise investment, as accumulating interest could lead to a cumulative loss rather than a gain. This scenario is based on the assumption that prices will indeed reach ₹20,000/- per square foot after five years. If it doesn't, then it will be a loss.
With fears of a global recession looming, the future is uncertain.
Many traditional investors believe that buying an independent house anywhere in Hyderabad is a better investment than purchasing a flat in gated communities, particularly if the goal is future resale, due to the considerable value of land under single ownership. Investing in villas in gated community, if the pockets are deep, is also a wise investment.
Setting that aside, business experts predict that there may be stagnation in Hyderabad real estate over the next couple of years, as prices have skyrocketed. The gap between demand and supply could widen, resulting in a bear market for real estate.
Given these factors, investors, especially NRIs, should consider their moves carefully. As mentioned earlier, if the purpose is to enjoy life in a gated community or to provide a comfortable living environment for family members, there’s no reason to hesitate. However, if the goal is purely investment, it’s wise to think twice.
