What will be the future of Hyderabad Real Estate post Telangana?

After taking the example of Hyderabad Real Estate to demonstrate our Rent by Price Ratio for Valuation <link> and sharing views on other Real Estate Valuation Methods <link>, today we are taking up a very hot topic of Indian realty sector after much reluctance – Hyderabad post Telangana. We did not want to discuss it on the public forum but due to increasing demand from our readers, we are finally expressing our views on Telanganized Hyderabad.

What is Telangana?

For our international readers, let us first introduce the issue. Telangana is going to be the next state in India which will be formed by dividing existing state - Andhra Pradesh. There are a lot of issues prevailing around this topic and a lot of political and social arguments have already been exchanged. Finally the air is – the state Andhra Pradesh will be divided to make way for a new state Telangana.

But this gives rise to another domino issue – where will the golden hen, Hyderabad go? – Andhra Pradesh or Telangana? Government seems to be struggling hard with this issue and looks like Hyderabad will act as shared Capital for both the states or will be given a status of Union Territory. So which way the real estate market of Hyderabad take turn – will it shoot up; or will it experience an avalanche? Let’s explore the possibilities.

Related Read: Rent Scenario in Hyderabad

Effect on Social, Political & Economic Scenario

Now	Then
Social Impact
Social unrest, communal riots now and then, clashes between pro & anti-Telangana communities.	No unrest, demands of both the groups shall be considered.
People not sure of their identity – whether they belong to Andhra Pradesh or Telangana!	Well defined boundaries, identity certainty.
Political impact
This has been a long political agenda and leaders too are divided over the issue.	Along with the views, leaders will be divided geographically too. Politics will focus more on development rather than the division agenda.
Development work is crawling at a slow pace as the leaders from different groups don’t promote regional developments.	New projects will emerge and existing projects will pick up pace.
Economic Impact
Hyderabad, being the IT capital of India, attracts software investments worth billions of dollars every year. But due to this uncertainty, international firms are being hesitant in investing in Hyderabad market.	With incorporation of Telangana, this uncertainty will do away and investors will be more confident in investing there. Companies like Facebook, Google & Apple have long awaited plans to spread their legs in Hyderabad.
Due to restricted investments, new jobs are not being created in this market – very less immigration.	Once the scenario gets clear and investors start investing in Hyderabad, new jobs will be created and huge chunk of IT population will migrate to the town.

Interesting Read: Real Estate after BJP Modi Sarkaar <link>

Effect on Real Estate markets

As is clear from the above table, the social, political & economic scenarios provide a promising picture once division is complete. So if we extrapolate them, there seems to be no reason why Real Estate market shouldn’t flourish. But that would be a vague approach to come to any conclusion. Let’s try to add rationale to this extrapolation.

Sector	Change	Effect on Real Estate
Social	A more sustained & stable social scenario	Definitely gives a boost to sentiments of locals and prices shall go up
Political	Leading towards a stable and productive government	New development projects => Boost to real estate
Economic	A safer investment paradise for investors	Increase in immigration => higher paying capacity => increase in demand => increase in real estate pace

So if we consolidate the above factors, it looks like that you should rush and grab a property in Hyderabad as soon as possible. We have done it, following our instincts and analysis; will you?

Disclaimer: The above analysis is done solely by RealT Horizon. These are our views and you should add yours before going for an investment or disinvestment in Hyderabad. <Long term position in Hyderabad>

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Serviced Apartments – An emerging arena in Real Estate

Not all but some of our readers will agree with this post. We recently got a chance to study the functioning and business model of Serviced Apartments in Hyderabad (India) and felt the need to share the same with our readers. Let’s see how effectively we can communicate our views on this topic.

Serviced Apartments – What are they?

For those who are not aware of the term Serviced Apartments; they are no different from normal residential apartments, but with an exception that they provide complete services to the tenants.

Serviced Apartments are fully furnished houses including all the white goods that are provided to the tenants for use. The tenants residing in these apartments can make use of all the “free services” provided by the owners – house-keeping, food, electricity, laundry etc.

In short, a Serviced Apartment can be thought of as a variant of a PG (Paying Guest) accommodation, with some exceptions.

Business Model

This is one of the most exciting and profitable business models that can exist as recurring income source in real estate. Here instead of charging for apartment as a whole, tenants are charged on per bed basis. This will become more clear from the following example:

Shown below is a residential apartment in Hyderabad having 25 apartments of 3 bedrooms each –

Now consider these 2 scenarios –

Scenario 1: Rent as an apartment

Earnings

Rent per apartment/month	No. of apartments	Total/month
Rs. 25000	25	Rs. 625000

Costs

	Cost per apartment/month	No. of apartments	Total/month
Misc	Rs. 2000	25	Rs. 50000

Net Profits

Profit

Rs. 575000

Scenario 2: Rent as Serviced Apartment

Earnings

Rent per bed/month	Total beds per apartment	No. of apartments	Total/month
Rs. 10000	6	25	Rs. 1500000

Costs

	Cost per apartment/month	No. of apartments	Total/month
Housekeeping	Rs. 2000
Electricity	Rs. 2500
Wifi	Rs. 1500
Food	Rs. 6000
Misc	Rs. 3000
Total	Rs. 15000	25	Rs. 375000

Net Profits

Profit

Rs. 1125000

So after looking at the figures of both the scenarios, we have very less to explain anything. You can cultivate money in the second scenario and at least we are considering jumping in this arena as soon as possible!

Disclaimer: The figures quoted above are exact figures of a Serviced Apartment in Hyderabad, but we are not sure whether this will hold true in other cities as well.

------ Thanks for reading RealT Horizon J ------

Should I invest in Flats or Villas?

More often than not, this is a very BIG question in front of an investor who is willing to invest a fortune in Real Estate. What is the correct option, we really don’t know; but we can have an analysis based on few parameters that we think are important in this regard.

Where do I want to invest?

The motive behind asking this question is to know about the development level of the intended investment area. The choice of investment will differ based on whether it a Tier 1 area or Tier 2/3 area. This is because the scenario of development and mentality differs in the above mentioned areas.

Go for flats	Villas may be considered over flats
Reasons	Reasons
·         Trend of apartments (flats) is more likely to be matured in Tier 1 cities	·         More and more new apartments are being constructed as this trend is emerging in smaller cities
·         Only a selected few prefer Villas	·         Villas still are looked upon as primary option for residence
·         Resale of flats in Tier 1 cities is not a very big issue; one can find several buyers easily	·         Resale of flats becomes a headache in these towns as buyers are few and have many new options to choose from
·         Flats’ value appreciate in these cities	·         It depreciates here
·         Rental prospects are good	·         Rental prospects are meager
·         Villas’ prices touches sky	·         Villas are still available at affordable prices

Closing thoughts:  Considering these above points and many others, we feel that flats have still a long way to go in smaller towns and villas have lived their life in the Tier 1 cities.

                                               

                                                      ------ Thanks for reading RealT Horizon J ------