Telangana impact: Housing prices to rise in Hyderabad

After remaining stagnant since 2009, housing prices in Hyderabad are set to rise as the market sentiment is likely to improve following Congress party's decision to create Telangana state out of Andhra Pradesh, rating agency Crisil said today.

"After a four-year hiatus, residential real estate prices are set to rise at a relatively faster pace in Hyderabad with the likely resolution of the Telangana issue (the announcement of the creation of a separate Telangana state and giving the city a special status  for 10 years)," Crisil said in a statement.

The research body pointed out that due to the Telangana agitation, residential capital values in Hyderabad had stagnated since 2009 and driven investors to other cities such as Bengaluru and Chennai.

"In the immediate term, real estate prices are likely to pick up due to buoyed investor sentiment in anticipation of the city’s return to political and economic stability," the statement said.

Crisil Research said it had earlier projected that Hyderabad residential capital values will grow by 6-7 per cent annually in 2013 and 2014.

"In the wake of the resolution of the Telangana issue, we now expect the growth in prices to be faster than our previous estimates and the gap in residential capital values vis-a-vis cities like Pune, Bengaluru and Chennai to narrow."

However, commercial lease rentals will continue to see only a marginal annual increase in 2013 and 2014 mainly due to a huge oversupply situation.

In the medium term, the agency said, the resurgence in corporate investments will improve demand for commercial office space. In turn, it will provide a fillip to job creation, particularly in those sectors where fresh investments were on hold, and boost residential real estate demand and prices.