Real estate is the land and any permanent improvements attached to the land, whether natural or man-made it includes water, trees, minerals, buildings, homes, fences and bridges. Real estate is the real property.
Out of all forms of investments-
- Equities
- Commodities
- Mutual Funds
- Gold
- Real Estate
As the world population is increasing day by day and the land available on earth is constant, this form of investment seems to be the best bet in the years to come.
Successful real estate investing starts while buying and not selling. Buying at low prices and Selling at high prices
Real Estate Sector Across India:
Since 2011, while Mumbai and NCR (Delhi) took the top positions in office space investments with over $5 billion and $2.8 billion respectively, Hyderabad took the 3rd position accounting for 15 per cent of the overall investments in the country, attracting 12 deals, worth $2 billion.
On the retail investments front, while Mumbai, Pune and Chandigarh topped the national charts with $951 million, $434 million and $267 million, respectively, in the last one decade, Hyderabad stood 4th in the country attracting $197 million.
The land prices have always been on the rise in Hyderabad-
Covid-19 Scenario:
As most of the world goes into lockdown, we can see the impact of the pandemic in the following ways on real estate in decreasing order of impact:
- Hotels:
The most affected asset class within real estate will be Hotels for all the well-known reasons one can think of. Hotel stocks around the globe have seen significant fall in stock prices in the fear of falling occupancies and room rates.
- Retail Malls:
Next in line are retail malls. Malls have been the first to be shut down as governments wanted to limit large gatherings. Retailers will be hit hard and kept negotiating rents during those months with landlords. After returning to the normalcy, it takes months of lower rent payments to get them back on their feet.
- Warehouses:
Industrial activity has reduced significantly in the last 5-6 months. This has led to very low demand for logistics assets like warehouses. E-commerce companies are the only ones holding demand in the segment but that too is bound to slow down.
- Office:
The last asset class to be affected is Office Space. There are two types of tenants here – front office tenants and back offices tenants.
Front office tenants, though not affected immediately will see an impact in the medium term as hiring freezes kick-in and a general recessionary mindset sets-in.
Back-office tenants have proven to be quite recession proof as was the case in the 2008 crisis where office take-up and rents in cities like Bangalore, Pune and Hyderabad actually went up as multinationals outsourced more functions.
- Residential:
The sales of all the residential units have also drastically come down by more than 80% in all the prime locations in the country. People are spending tightly and are going in a wait and watch approach.
The real estate sentiment remains one of cautious optimism. Even as the current trends look weak in view of Covid-19, much of Hyderabad real estate market’s key stakeholders are hoping for normalcy to return, which will boost growth across all asset classes.
Though the short-term market sentiment indicates that the investors would prefer to wait till the pandemic comes under control and also look to gauge the impact of forecasted recession on office space demand in 2020 before investing, the strong fundamentals of Hyderabad could help in faster recovery.
My Take:
Hyderabad is on the advantage front as it is the capital of a relatively young state and is home for many MNC companies. In the last few years it multiplying its IT/ITES base faster than before. As a result some of the global majors like Amazon, IKEA, Flipkart have come into the warehousing real estate sector by opening their warehouses/fulfillment centers in and around Hyderabad
Coming to the residential sector as the prices on the land have somewhat come down from its peak it is better to invest before it again increases. As in the earlier info graphic we’ve seen that the land prices have always been on the rise until the pandemic has struck us!
All and all it is important for people to be cautious and at the same time optimistic towards the realty sector!
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PK,
PK Enterprises.
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