The commercial property and office space off-take in Hyderabad and surrounding areas has begun to show signs of revival after a lull of few quarters due to slowdown in the economy, especially the real estate segment.

This new momentum in property deals is significantly driven by the services sector, particularly the IT sector, which has begun to recruit again to meet business growth and expansion plans. Interaction with some of the developers shows that there is preference for smaller sized projects compared to large ones a couple of years ago.

The Chief Operating Officer of Lanco Hills, Mr S. Pochendar, said that within a couple of quarters, this momentum will only get better as more IT companies and other services segment players, including financial, will take up expansion. However, the bookings could have been at a much faster rate.

“For instance, if you look at other cities such as Mumbai, Bangalore and Chennai, the revival there is faster. The bookings are slow off the mark as of now in Hyderabad due to recent setbacks. But there are enough indications to suggest that the situation is getting much better by each passing day,” Mr Pochendar said.

The Managing Director of Manjeera Constructions, Mr G. Yoganand, said that clearly there is preference for smaller office spaces rather than booking of large blocks at one go. “Therefore, we have launched a Rs 150-crore project in the IT hub of Gatchibowli, whose focus is on offering spaces starting from 1,500 sq.ft. onwards.

SEZ DEVELOPERS

In spite of the clear signals of revival in the economy and bookings going up in the last two quarters, developers of special economic zones (SEZs) are still wary of venturing into projects as most of them are based on rentals. In fact, most of the funding options for such projects have dried up – be it from banks and financial institutions or, significantly, private equity forcing developers to stay away from new projects, Mr Yoganand explained.

According to estimates, the last two quarters has seen booking of about two million sq.ft of office space from the IT sector alone. But the events in November and December have had some impact on the growth of the sector. Most of the companies are preferring to wait and watch before taking major decisions, Mr Yoganand said.

In the last quarter, the State Government has also outlined plans to strengthen the infrastructure in some of the peripheral areas of the city dotting the emerging business hubs leading to the new international airport. This has also encouraged some people to think about reviving some of the commercial property development, he said.

MALLS, SHOPPING ZONES

Significantly, the slowdown has had a major toll on commercial space meant for malls and shopping zones. Most of the properties which were nearing completion could not secure bookings. Such projects are now coming up for interest from services sector, Mr. Yoganad said.

The President of Greater Hyderabad Builders Federation, Mr Prabkakar Rao, said that the demand from the software services sector has not revived fully. This is amongst the biggest consumer of new projects that have come up in Hyderabad in the last few years.

“Though there is growth in terms of taking up new office space, it is yet to reach the normal level of bookings. Even those who are taking up new projects are preferring smaller facilities rather than taking up large chunks at one go,” he said.

Among the recent additions to the commercial space has been the mega project of Tishman Speyer in the Financial District near Gachibowli. TCS has taken up significant part of the property developed by the US firm along with its Indian partners.

In the transition phase leading to full revival of the real estate sector, particularly commercial space, the lease rentals rates have fallen significantly, up to 40-50 per cent from recent highs. This is also encouraging those looking to expand to take up new leases, Mr Rao said.

CAUTIOUS APPROACH

Referring to the development of some of the related commercial space in the Lanco Hills, Mr Pochendar said that they have adopted a cautious approach to expansion. “We will initially complete booking for the four lakh sq.ft commercial space which we have developed before embarking on new projects, including the hotel venture.

The residential space within the Lanco Hills of 2.5 lakh sq.ft will be ready for handing over in couple of months,” he said.

Popularity: 1% [?]