Hyderabad emerges most resilient; returns to normalcy faster than other cities: JLL report

Hyderabad continues to show resilience and its real estate dynamics kept up the momentum according to the JLL-CII report “Hyderabad Real Estate – A Road Map amid the COVID -19 crisis,’’ launched today. The city’s real estate performance was far better in H1 2020 as compared to other cities in India. Its formal economy was one of the first in urban India that resumed its stability as the lockdown rules were relaxed.

Despite the nationwide lockdown, in Q2 2020, Hyderabad continued to witness relatively good office leasing and residential sales. Once construction activities resumed in May 2020, the city also saw supply of new office buildings in addition to new residential projects. Hyderabad also led India’s office supply with a 30% share in H1 2020, significantly driving the country’s office absorption with an 18% share during the same period. Further, the city reported strong sales with the least unsold inventory in India which can be offloaded within two years.

Ramesh Nair, CEO & Country Head, India, JLL, said, “Hyderabad’s resilience comes from the confidence of doing business instilled by the state government. The business-friendly policies of the government has helped corporates leverage the existing ecosystem in the state to maximize output and emerge as the destination of choice. For example, growth of the IT sector in the state: While national IT exports grew by 8% in 2019-20, IT exports here grew by 18% in the same period. Owing to its robust and fast developing infrastructure along with ease of living, offering a cosmopolitan environment, today, Hyderabad is a major destination for India’s young workforce.”

In JLL’s latest GRETI (Global Real Estate Transparency Index) report in 2020, India experienced higher improvement and it is in the cusp of becoming a transparent economy. The focus of the government on sustainability transparency with focus on wellness and PropTech adoption drove this improvement.

Hyderabad has been one of the fore runners in India in these parameters. This further strengthens the investor confidence in the city’s real estate. Through the much-appreciated TS-iPass, ICT Policy and other investment friendly initiatives by the state government, the city has witnessed a major economic growth in the last six years.

Sandip Patnaik, Managing Director – Hyderabad, JLL, said, “Hyderabad’s positive reaction to the crisis has reflected tremendously in the city’s real estate performance. The focus of the government on business-friendly policies has helped Hyderabad emerge as a one of the leaders despite the global pandemic. Impressive investment in the infrastructure sector and the state’s fast track execution has tremendously contributed to the city’s real estate growth. An active real estate market and strong economic growth along with a thriving start-up culture have helped the city to gain one of the leading positions globally.”

To understand the depth of the crisis and the reaction of stakeholders, JLL conducted a survey to understand the strategies of the top ten developers in various sectors and interviewed corporate leaders of companies in Hyderabad.

The results of these surveys and discussions on each sector is summarised in the following sections.    

Office Real Estate – As the city opened in early May 2020, construction activity resumed in a few projects and a few office projects started operations by June 2020. A total supply of 3.7 million sq. ft was added in H1 2020. Demand dynamics also remained strong as a few key office leases with large area were closed after the lockdown was relaxed in May 2020. The city reported an absorption of 2.1 million sq. ft in H1 2020 which dropped the city’s vacancy rate to 9.2 %.

Residential Real Estate – Hyderabad witnessed highest quarterly launches ever during the lockdown period in Q2 2020. Most of these launches were in the northern and eastern submarkets. Despite the healthy volume (of launches), good sales kept the city’s unsold inventory at the lowest in the country.  Construction resumed in many projects in the city, albeit at a slow pace due to reverse migration of construction laborer’s during the lock down.

Retail Real Estate – Developers in Hyderabad offered rental waivers or rental deferments to battle the ongoing crisis. Highstreets in Hyderabad, meanwhile, gave some relief to the retailers as they are a relatively cost-effective solution to malls in these tough times. Leasing activity has continued in Highstreet retail properties. Construction of upcoming malls has resumed, although at a slow pace.

Urban infrastructure development of fringe area with tech solutions, diversification of economic base and development of new economic hubs will assist Hyderabad’s real estate sector to overcome this storm and emerge stronger. Digital technology solutions like the Internet of Things (IoT), AI, sensors and geospatial technology, can be used to gather accurate data and detect real time problems to efficiently manage the urban infrastructure of the city. As office assets showed confidence of high growth and stable returns for the medium to long-term, global institutional investors and sovereign wealth funds showed an increasing interest in the city over the past few years.

While the state government gave confidence to corporates through its business-friendly policy support in H1 2020, it utilised the lockdown period to upgrade the city’s urban infrastructure and aesthetics by employing labour who otherwise would have been unemployed. Hyderabad recorded the highest office net absorption in 2019 (as a proportion of existing stock) compared to any city globally, while standing among the world’s best-performing cities for prime office rental growth according to the recent JLL City Momentum Index (CMI) 2020 report.

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