Government Policies and Rentals Make Hyderabad Hard to Miss

What makes top 5 companies of the world-- Facebook, Amazon, Apple, Microsoft and Google choose Hyderabad as their home in India? The answers are low rental rates, abundant manpower and business-friendly reforms introduced by the Telangana government. Players across the world have appreciated the proactive state government policies, making Hyderabad one of the fastest-growing metropolis in India and home to several technology firms and large global companies. 

The four-century-old city has witnessed several fluctuations in the real estate market and yet remains attractive. There are more than 1500 Information Technology(IT) and IT-enabled companies in Hyderabad providing direct employment to over 7 lakh people. The city, which is playing a pivotal role in the development and manufacturing COVID vaccines, also will help boost employment and demand of real-estate from pharmaceutical companies as well in the near future.

Until now, 90 per cent of IT sector growth was confined to Western parts--Madhapur, Gachibowli and Kondapur of Hyderabad. The Grid policy will help the development of the sector in Uppal, Pocharam in the east, Kompally in the north, RGIA, Shamshabad and Adibhatla in the south, Kollur/Osmansagar in the north-west. The policy will help generate employment and develop commercial and residential real estate around these areas. 

In addition, the government’s push for Atmanirbhar Bharat has helped Hyderabad in getting the attention of indigenous manufacturing industries, especially in the defence sector. Thus, the city’s real-estate sector continues to develop, even during the pandemic situation. 

Coworking demand to come back

The sentiment of real-estate scenario, however, is a little different. With the impact of COVID-19 lockdown on the financial well-being of corporates, the priority is conserving the cash and hence, deferring the CAPEX and expansions. Coworking firms are expected to in demand again as they help companies save costs and provide space at short notice. Players are offering customised solutions and more flexible configurations to the clients. Thus, the coworking business is seeing steady growth even in during the pandemic.

The emergence of the hub-and-spoke model

In the Hyderabad market, corporates are increasingly looking for hub-and-spoke strategies and have their offices spread across the city, particularly in areas where talents are readily available. This augurs well with the government’s strategy to disperse real estate development. The key, hence, will be to develop good connectivity using the metro and public transport across the city. The state government can help further by identifying a few clusters of mixed-use developments and connect them with a reliable city transport network.

Office leasing to rebound

As expected there is limited activity in the corporate occupancy front. However, new leases are taking place especially for those having their lease expiring soon or multinational companies entering in India as part of their long-term business strategy. The demand for office spaces for medium-term is expected to rebound faster than they have dropped. Employees want to come back to offices as limitations of work from home are becoming increasingly evident.  Social capital that has accumulated over the years is fast depleting.  

India, especially Hyderabad will be the biggest beneficiary when the tide turns, as companies will look for talent, enabling environment and good quality supply of resources, all of which are available in the city.  There are more than 70 million square-feet Grade A development in the pipeline in West Hyderabad alone, planned over the next five years.  While there will be short term delay in supply due to prolonged lockdown and labour shortage, it will reduce pressure on rentals demand will also remain subdued for the next two quarters. 

With the emergence of hub-and-spoke real estate strategies, state government’s push to evenly spread the development across the city, hitherto under-developed markets will see an increased demand for space. We also see that coworking spaces are positioned to well fill this gap and help companies transition from the current restrictive environment to a more relaxed environment in coming times. Hyderabad, without a doubt, continues to reinvent itself and will remain more relevant than ever.