Recent political developments and newly elected Andhra Pradesh chief minister Chandrababu Naidu's renewed focus on Amaravati have stirred up the real estate dynamics in Hyderabad, the capital of Telangana. The Telugu Desam Party's mandate in neighbouring Andhra Pradesh, with a sizable majority and a significant ally at the centre, may cause Hyderabad's real estate market to moderate, albeit gradually, with several investors and businesses expected to migrate to Andhra Pradesh, say experts.
This shift could draw some investments away from Hyderabad, leading to a temporary correction in the Telangana capital's real estate prices by 10-15 percent and a potential dip in the commercial real estate market, they add.
Research by real estate consultant ANAROCK added that Andhra Pradesh's potential development can be a double-edged sword for Hyderabad's real estate. "However, the overall impact is likely to be positive as Andhra Pradesh's growth could spark a ripple effect, attracting businesses and investors to the entire region," it said.
This comes after Naidu announced on June 11 that Amravati would be the sole capital of Andhra Pradesh
In 2014, when Andhra Pradesh was divided, Naidu had drawn up big plans for Amaravati. He had floated the idea of Amaravati as the capital city during his tenure as the first chief minister of the bifurcated Andhra Pradesh between 2014 and 2019. The idea, however, was shelved when the TDP lost power in 2019 and the YS Jagan Mohan Reddy-led YSRCP won a landslide victory.
The Telangana effect
Experts said that since the bifurcation of Telangana and Andhra Pradesh, Hyderabad has slowly consolidated its position as one of India's top real estate hubs.
The city's IT-ITeS sector, infrastructure development, and overall business ecosystem are likely to sustain demand for quality housing and commercial spaces, said Prashant Thakur, Regional Director & Head – Research, ANAROCK Group.
"The city has seen significant real estate growth, with property values appreciating by 45 percent between 2021 and 2024. However, there are potential challenges as well. The resurgence of Amaravati might lead to some out-migration of businesses and residents to Andhra Pradesh, which could result in a temporary correction in Hyderabad's real estate prices," Ritesh Mehta, Senior Director and Head (North and West), Residential, JLL India, told Moneycontrol. "Despite this, Hyderabad's diversified economic activities and strong fundamentals are likely to sustain its long-term growth."
However, experts say that this will take at least a year to show an impact in both markets. With more than 60 percent of employees in the city hailing from outside the state, Hyderabad has evolved become a cosompolitan city. "Additionally, a majority of the investments we see in Hyderabad's real estate are from NRIs. The NRI base in the city has increased by 5-7 percent over the last year from Canada, the UAE and the US," Abhishek Bhadra, Head of Research, Magicbricks added.
All eyes on Amravati
Thakur said that Naidu has already proved his mettle in developing Hyderabad as a major city, and was successful in attracting major IT-ITeS, pharmaceutical and industrial companies to the state.
This has been instrumental in generating employment and attracting talent from across the country, thus also spurring rapid real estate development. The recently concluded election mandate has now renewed Amaravati's prospects.
GV Jagdish, a Hyderabad-based senior realtor at Hanu Reddy Realty, however, pointed out that before the bifurcation, several investors in Andhra Pradesh had already started investing in then-capital Hyderabad and its outskirts and continue to hold large land banks in the area. National Real Estate Development Council (NAREDCO) President G Hari Babu estimates that more than 60-70 percent of the initial investments came from Andhra Pradesh.
Thus, after Amravati consolidates its position as a new commercial hub in the state, there are chances of getting renewed investments from the businesses already invested in Hyderabad.
"Before bifurcation, Naidu had already acquired more than 33,000 acres from farmers and started building the city. In 2014, the land rates in Amravati hovered around Rs 15-20 lakh per acre and shot up to Rs 2.5 crore before the government change in 2019. However, since then, we saw the investments falling, and real estate prices dropped almost 50 percent—and in some areas, 60 percent—in and around Amravati," Babu added.
Since January, real estate prices in Amravati have increased steadily, and today almost doubled from Rs 6,000-7,000 per sq ft, said Jagdish.
Market sources suggest that with Naidu back in the saddle, investors and developers have already started showing interest in real estate prospects in the city, owing to low affordable land rates and available land parcels.
For example, on June 13, in an interview with CNBC-TV18, Pavitra Shankar, Managing Director, Brigade Enterprises, said, "Andhra Pradesh is the only South Indian state where Brigade does not currently have a presence and hence we want to see some traction on the ground before embarking on developments in Amaravati. The growth potential is a critical factor before deciding to enter a new market."
A spokesperson for Mumbai-based Godrej Properties also told Moneycontrol that the company is open to new opportunities that might come up in Andhra Pradesh, including Amravati.
"However, the prospects will largely depend on how the state government manages to create jobs over the next few years, the development of Vizag airport, and also the ongoing development projects in Amravati," said Babu.
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