Hyderabad- Achieving New Milestones - JLL · PDF fileHyderabad- acHieving new Milestones ... in the existing building rules of the state ... rules (G.O. Ms. no 168, Md&Ud, dt: 07.04.2012

August 2016

Hyderabad- Achieving New Milestones

2 Hyderabad- acHieving new Milestones

Hyderabad- acHieving new Milestones 3

Reforms and Policies Opening new roads of development in real estate Hyderabad is one of most dynamic cities of India at current times. Attracting the likes of Apple, Google, Amazon, Uber and Ikea Hyderabad is rivalling against the top metro cities in India in terms of investments. After being in the shadow of political uncertainty for three to four years Hyderabad was placed far beyond the radar of investors. But at the wake of the new government Hyderabad revived in a very short time. The city was successful in bringing the top global firms to start or expand their operations and find its place back and this time more aggressively. Hyderabad was ranked 17th among top 20 global cities in JLL’s City Momentum Index (CMI) 2016 . Only two cities in India featured in the CMI, the other being Bangalore ranked 4th. One of the key drivers for this resilience of Hyderabad in last two years has definitely been the political stability instilled by the newly formed Government of Telangana and the pro-activeness of the government to make Hyderabad one of the top cities not just in India but globally. Though the format of ORCs is currently a phenomenon seen only in the major tier-I cities of India, we could soon witness the concept mushrooming in other cities as well given its relevance and the immense benefits it offers to retailers and the corporate crowd. We make an attempt to introduce the concept, character and status of this newest retail real estate format through this paper.

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What made Hyderabad Rank 17th Globally?

stable Government, state of the art Infrastructure, Business Friendly Policies and Reforms or all? Let’s find our answers as we map the development of Hyderabad and zoom in closely to understand this stable resilience of Hyderabad. Hyderabad, a city holding a rich culture and heritage and a city of historical importance in India, established itself as one of the key IT hubs of India in late 1990’s. This was the time when Hyderabad witnessed many business friendly policies and infrastructure development. These in turn surged the real estate development in the city and Hyderabad witnessed national and international developers and investors starting their projects in the city along with the local developers. By the end of the decade Hyderabad

JLL CITY MOMENTUM INDEX 2016

TOP 20

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8 18

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AsPECTs CONsIDErED IN CMI HYDErAbAD’s sCOrE fACTOrs

CMI tracks the• speed of change of a city’s economic base • commercial real estate market • covers 120 major established and emerging

business hubs across the globe

The government introduced • Ti pass and developed the THub which clearly indicated the intention of the

government to build a strong base for a high –tech economic development. • The economic development is more focussed to attract not only the existing

business giants but at the same time embrace and encourage start-ups and innovation.

The CMI gauges • a city’s short-term socio-economic and commercial

real estate momentum (over a three-year horizon) in combination with measures of ‘future-proofing’

• whether a city has the essential ingredients to ensure longer-term sustainable momentum in terms of education, innovation and environment.

• Hyderabad left many cities behind with its state of the art infrastructure and policy changes and reforms which is etching the way forward for future development.

The index is unique,• in that it captures the dynamics of a city’s real

estate market • its rates of construction and absorption, price

movement• the attraction of a city’s built environment for cross-

border capital.

• Hyderabad showed positive signs by witnessing significantly high absorption levels of 5 million sq ft of office space in 2015 and increased interest of investors on the city.

• Construction activity started increasing as occupancy levels started increasing in buildings given the improved demand.

• Sales and launches in residential sector also witnessed a significant increase during the same period as buyer’s confidence revived back on Hyderabad

was competing with the top metro cities of India in terms of its business attractiveness and state of the art infrastructure. However after the global financial crisis (GFC) the city faced immense political instability which shadowed the development of the city for few years. In the meantime the city’s infrastructure developments continued and slowly the city was ready for taking up huge real estate developments, but with least investor interest. The establishment of political stability in 2014 with the formation of the Government of Telangana, Hyderabad started treading a new path towards development under the able leadership of the new government.


What went Right?

PrO–ACTIvE GOvErNMENT sUPPOrT TO rEvIvE bUsINEss sENTIMENTs

Government plays a key role in driving development of any state or city especially in establishing investor’s confidence. After establishment of political stability in mid of 2014 the Government of Telangana aggressively worked towards improving the business sentiments of the city. The Government worked towards introducing new business friendly policies, policy reforms and infrastructure development to bring back investor confidence in to the

KEY DrIvErs fOr HYDErAbAD’s rEsILIENCE

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AvAILABILITy And ReTenTIOn OF

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state. These increased the state revenues by almost 40% in one year backed by a similar increase of more than 40% increase in stamps and registration revenue receipts. The Government also took up many promotional events and activities such as “Make in Telangana” to attract investment in the state. Large international and national level conferences, expositions and concerts and cultural festivals are being conducted to present Hyderabad as an event destination and promote brand Hyderabad.

40% growth in

revenues

INR 68908.02 Cr

(2015-2016)

INR 48620.26 Cr

(2014-2015)


Ts-IPAss Part of the Industrial policy, it’s most significant feature is Ts-ipAss that promises 15 days’ clearance policy and penal action against government officials as well as project being deemed approved if there is any undue delay in processing applications after 15 days.

• Global players like Lonza, novartis, Mylan, DuPont, Sanofi, Merck and US Pharmacopeia are located here along with dr. Reddy’s, Aurobindo pharma, etc.

• While these directly increase ITes service opportunity in healthcare, these companies have expanded further.

• Areas south of Hyderabad, especialy shamsabad and adjoining areas are to witness added impetus as the new pharma City takes shape.

ICT POLICY: • development of Information and Technology Investment

Region (ITIR)• new IT parks on ppp basis• special focus on sMes and start-ups• 2 electronics Manufacturing Clusters (eMCs) at eCity

and Maheshwaram• THub – start-up community ecosystem for tech based

entrepreneurship on ppp basis• Focus on gaming, animation, data analytics, data

centres, Internet of

LIfE sCIENCEs POLICY: • development of pharma City• Biologics and Bio-similars• Life sciences knowledge Center• Life Sciences sector to be classified as Industrial Sector• To be designated as Industrial Area Local Authority.• Life sciences and Medical devices park• Incubation and funding through Research And

Innovation Circle of Hyderabad (RICH)• World pharma Trade Centre

These policies have added accountability, transparency in the system and reduced bureaucratic red tapes. It has encouraged investors and has helped in converting successfully several MoUs to project on ground. This has resulted in spike in investments.

Sectors that directly influence the real estate market like IT/ ITes witnessed the likes of Amazon, Google, deloitte, JpMC expanding and Apple, development Bank of singapore, etc

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EsFew new policies and policy reforms which improved the business sentiments of Telangana or in turn for Hyderabad city and its real estate sector are discussed in the following table


AMENDMENT IMPACT ON THE sECTOr

GOvErNMENT sUPPOrT TO rEvIvE rEAL EsTATE sECTOr

In addition to the above policies, the Government made amendments in the existing building rules of the state to encourage the growth in real estate sector which is a significant contributor of the state’s GDP and employment. There were 21 amendments made to the existing building rules (G.O. Ms. no 168, Md&Ud, dt: 07.04.2012 and G.O. Ms. no 245, Md&Ud, dt: 30.06.2012) as per the new G.O. Ms. no.4, 7, 8, 9 and 10, MA&Ud, dt: 05.01.2016) in view of ease of doing business in real estate sector, provide employment and promote economic growth .These amendments not only opened more opportunities for developers, but the same time made the approval system accountable along with making concession system and provision of affordable housing more flexible for the developers. Few significant amendments and their impacts on real estate sector have been discussed below

IMPACTs Of THE OTHEr AMENDMENTs• Opened more land for development and recreational purposes• TdRs given at various cases which opened more opportunity for developmental activities for developers or landowners.• ease of doing business and approval time reduced. Therefore reduced impact on holding costs of land due to lengthy approval processes of

various institutions such as railways and defence.• parking provisions • Opportunities for redevelopment in Old city areas, congested areas and slums • Flexible concession options • adhering to safety measures• To reduce project delays and hold the sanctioning authorities accountable for the delay.

AMENDMENT-12 IN GO. Ms NO 7: Introduction of shelter fee instead of mandatory provision of economically weaker section (eWs)/ Lower Income Group (LIG) housing.

This has been one of the remarkable amendments made in the building rules. This not only takes care of the provision of affordable category housing which is aimed towards the Government of India’s mission of Housing for all. But at the same time enables the developers to develop products on the land which are financially feasible and justify the land cost of the project.

AMENDMENT-1 IN GO. Ms NO 9: Revision of impact fee

The state government has understood that the impact fee in the state for high rise buildings was not comparable to cities like Mumbai and Bangalore. As such many developers were unable to launch their high rise projects. As the government understood that the development of high rise is not only an identity of a growing economy but also lowers ground coverage of the building which is beneficial in future and can be used for green belt etc.


sTATE Of THE ArT CITY INfrAsTrUCTUrEOne of the most attractive features of the Hyderabad is its state of the art infrastructure. The high class infrastructure development of the city can be experienced right from landing on Rajiv Gandhi International Airport and driving down to any part of the city through the 8-lane high speed nehru Outer Ring Road (ORR) or driving down into the core areas of the city through the 11 kms elevated express way. In addition to these the commute within the city is enhanced with flyovers and wide roads to reduce the travel time considerably when compared with commuting within most metro cities of India.

Interestingly the Government has not just stopped at this they are working progressively towards development of the infrastructure further to improve the quality of life of the citizens of Hyderabad city. Few noted developments are mentioned as follows

• strategic Road development plan (sRdp) • Hyderabad Metro Rail development• Two elevated corridors in secunderabad area to

connect to ORR• Completion of ORR. These are aimed towards decongestion of city roads, faster accessibility between east and West of Hyderabad and ribbon developments of Chandanagar – Miyapur – kukatpally – Moosapet and Uppal - Ghatakesar stretches. These developments will promote real estate activities further in these areas which are already witnessing steady demand in residential and retail due to good connectivity.

HYDErAbAD: CITY wITH A rICH rEPOsITOrY AND EvOLvING As A HAPPENING PLACEevery city that keeps it wheels of economic machinery moving needs to be a repository of resources: social, cultural and human talent capital. But beyond that what also keeps the momentum is it capacity to evolve so that it retains these resources. Hyderabad has availability of rich talent with line-up of national and internationally reputed educational institutes. The city boasts of several such centres like IsB, IIT, IIIT, BITs pilani, XLRI, nIFT, nALsAR, etc. to name just a few some of them one of their kind in the country. And to retain this talent the city also has a very good quality of life to offer. The social structure which includes the basics of education, civic services and healthcare are well established in Hyderabad. Health care institutions with high class facilities such as Apollo Hospitals, Continental Hospitals, Care Hospitals etc to name a few are present in the city. The city boasts of a civic infrastructure that too is among the best of the country with an all e-governance compliant mee-seva services; a single window service portal for citizen as consumer connects to government services – the first of its kind in India. This reduces the many hassles of otherwise cumbersome procedures one has to face for regular and basic service requests/ grievances and payments.

The city also has many entertainment options such as themed restaurants to resorts and amusement parks in the likes of Ramoji Film City or Wonderla. Adding to this entertainment structure, the government too have been productive to promote Hyderabad as an event friendly city. Thus we have seen, international music concerts, dance festivals, tourism initiatives like adventure tourism, helicopter rides, hot air ballooning, etc. The city has already been a hub of south Indian movies and has a great influence in the entertainment scene of this part of the country. All this have made Hyderabad a happening place to be where the young and dynamic generation of employees working in the different business sectors of the city unwind themselves post their daily work hours. The diverse and myriad opportunities help the city to bank on being more global and cosmopolitan and strengthen its appeal. It is therefore no surprise that Mercer’s Liveability Report – a report’s results which most corporates consider when deciding to enter for business in the city, has consecutively ranked twice the city of Hyderabad as the ‘Best City to Live in ‘India.

Hyderabad 17th among top 20 global cities

in JLL’s City Momentum Index (CMI) in 2016


Hyderabad real estate development is rising towards its next peak with the establishment of the new government after 2008. High demand from corporates rising absorption levels to new heights, increased retail activity on the high streets and malls along with significant increase in residential sales and launches indicate that Hyderabad is again moving up aggressively into the investment radar in the real estate sector. A large part of this development has been driven by the revival of business sentiments which was in turn driven by the pro-active government support.

OffICE sPACE AbsOrPTION AGAIN ETCHEs UP TO 5 MILLION sq fT IN 2015Among all sectors, it was the office space activity that reflected the resurgence of Hyderabad. While even during the days of political instability, Hyderabad managed to keep growing albeit slowly, rental growth in the city particularly in Hitec City and Gachibowli remained low. However, as the new government took position and introduced its industrial policy with its stellar feature of T-ipAss, it marked the beginning of a much awaited revival of the city’s economic health. As the corporates who were already doing business in the city started to expand (e.g.: novartis, deloitte, Accenture, etc.), the government’s dedicated focus to bring in new players which fructified as Uber, Google and Amazon and Apple investing in Hyderabad. Over the last two years the office space absorption almost doubled every year from 1.8 million sq ft absorbed in 2013 to around 5 million sq ft absorbed in 2015. The developments have picked momentum from there as the city witnessed both national and international companies expand or debut their portfolio in the city. As the demand grew, the existing stock got fast lapped up and the city’s vacancy levels in key IT hubs dropped to as low as 2-3% in 2016 from 5-7% in 2013. This pushed the rentals in the city to new peaks and the rents appreciated by almost 8-10% y-o-y from 2013 onwards.

To occupiers, Hyderabad with its extremely seamless ease of doing business, a thriving ecosystem of great infrastructure, rich and diverse talent pool and a pro-active government has and will be a preferred choice for port of call as the city still has its competitive edge in the office rentals with respect to cities such as Bengaluru, Chennai and pune. As the government starts to diversify and

broaden the scope of interest for Hyderabad from IT/ ITes and biotech to horizons of defence, aviation, banking and finance, gaming and animation and new generation start-up revolution, the growth story of the city will only grow from here going forward.

Real Estate Performance – Post formation of Telangana State

fINANCIAL INDICATOrs

Arrows indicate 12-month outlookIndex base: 1Q02 = 100source: JLLFinancial Indicators are for the City Overall.

5 million sq ft of absorption in 2015

2-3% vacancy in key

IT hubs

Rents appreciate by almost

10% y-o-y since 2013


rEsIDENTIAL sALEs IN HYDErAbAD GrOw bY ALMOsT 50% IN 2015

As the government policies spiked the real estate growth in office sector in Hyderabad, it presented opportunities in the likes of increased employment opportunities and attracting talent pool from all parts of India and in all levels of the management. This opened the scope for housing with the influx of new employees with various income brackets and thus broadened the different residential segments. While affordable segment received the major boost, villas and high-end apartment residential demand too received a shot in the arm as businesses started basing their India operations in Hyderabad and thus bringing in employees in the higher income segments with their set of choices and preferences of lifestyle. Interestingly Hyderabad graduated from a purely end-user driven market to a fairly larger share of investors driven market given the opportunity for appreciation of property values and increasing rental demand.

These developments are reflected as we witnessed rise in number of project launches, the total number of unit launches and their corresponding sales conversions. Buoyed by the strong economic activity and a string of infrastructural developments like Metrorail construction, strategic road development and elevated corridors, etc., the developers who were fence sitting earlier in ambiguity of Hyderabad’s prospects, pre new state formation began accelerating their project developments. This resulted in the number launches growing by more than 40 – 50% y-o-y. In fact in the year 2013 – 2014 itself the market witnessed more than 65% rise in unit launches. Following the developers’ sentiments looking up, even sales picked up and we have witnessed it grow by almost 50% in 2015 end since 2013. Consequently, both rentals and capital values in the market have witnessed an upward swing. Interestingly Hyderabad did not witness an inflated speculation but a steady growth that was backed by demand numbers. This thus kept a significant inventory in the affordable bracket and perhaps makes Hyderabad, a city which has very comfortably priced apartments, villas and even plots at prominent locations which are within city limits. The key locations in western side of the city which comprises mostly Hitec City and Gachibowli and its adjoining areas witnessed strong appreciation of capital values of as high as 10 – 15% y-o-y in certain cases due to right project positioning. However Hyderabad still continues to attract buyer’s interest as the prices are still much affordable when compared to most metros given the quality of infrastructure the city provides its residents. despite of construction costs and approval costs in Hyderabad being more or less similar to other cities in India, we do not witness much speculative increase in residential prices relative to other cities.

fINANCIAL INDICATOrs

Arrows indicate 12-month outlookIndex base: 4Q03 = 100source: JLLFinancial Indicators are for the City Overall.

sales increase by

50% in 2015

Launches increase by

65%in 2015

prices appreciate by

10-12% in 2015

rEsIDENTIAL Cv INDEX


HYDErAbAD NOw EXPErIENCE sUPErIOr GrADE Of rETAIL sPACE AMIDsT sTAbLE DEMAND

As the two sectors office and residential market witness growth, retail in Hyderabad too have now witnessed renewed interests by developers. Hyderabad had not witnessed any retail developments for a long time and the ones under construction were being delayed. As the market started springing up and retail demand began

3 million sq ft

of Mall space to be operational in next two years

to grow to compliment the newer residential localities, developers too have started witnessing surge in interest from prospective tenants. As a result the city is witnessing several small to medium sized mall formats opening and the same is expected to continue going forward. even large scale projects too have accelerated and thanks to the unique Transit Oriented development project of the Metrorail, Hyderabad will witness a new retail rise in the form of malls adjacent to metro stations that help stretch the consumer catchment further.

Retail in Hyderabad still remains a high street dominant market and so rental appreciation has been steady in malls with the superior ones trading at a higher market average as they have very low vacancy. It is therefore time that Hyderabad now experience superior grade if not essentially larger format malls to welcome new retailers and the supply pipeline looks promising going forward.


And many more new milestones to achieve…Hyderabad is already on the path to achieve new milestones. Few noted projects such as pharma City, Financial district II and Townships along ORR proposed by the Government is likely to surge the development even further. These projects along with projects such as Aerospace sez, Alexandria Biotech park etc which are already operational in the city, Hyderabad is likely to witness overall integrated economic development. The stable and pro-active government, further improved infrastructure and talent pool will continue to remain the drivers of this growth story further. But something more interesting to look at will be how Hyderabad shapes itself into a new capital which encourages and enhances innovation through opening new opportunities for start-ups, tourism development, manufacturing etc. All these will consecutively open up more opportunities in real estate sector. Although there are few recommendations which are likely to surge the development of real estate sector even further are mentioned as follows

• Fast track approval for change of land use• Online issue of Occupancy Certificate• Tax or other incentives for green building construction practices

With all the factors discussed above we foresee that the Government’s vision and continued support will engrave another new growth story for Hyderabad in the years to come. And Hyderabad will witness an integrated economic development driven by innovation.

rEvOKE• City Level Infrastructure Impact Fee• Minimum 3% of built up space for common amenities

fAsTEr IMPLEMENTATION Of• Approval for change of land use• Issues of Occupancy Certificate

INTrODUCE• Online sanction of building plans• Online payment and self-assessment of property tax• Tax or other incentives for green building construction practices



Authors

Acknowledgement

Trivita roy

Associate director, Research & [email protected]+91 98850 33850

Trivita Roy has joined JLL Research team in 2007.Based out of Bangalore, she manages the south India operations for Research; she contributes to topical whitepapers, property market digest and research deliverables on industrial, commercial, retail and residential real estate markets in India. she is also responsible for Indian real estate intelligence service (ReIs) Trivita is trained as City planner from Indian Institute of Technology kharagpur besides being an architect and also holds a diploma in

executive Global Business Management from Indian Institute of Management Calcutta. she has ten years of experience in real estate research.

Aritra Das

Analyst, Research & [email protected]+91 95157 20645

Aritra das manages the Research and Real estate Intelligence service (ReIs) offerings for Hyderabad. He joined JLL in 2015 and contributes to topical whitepapers, research deliverables on office, retail and residential real estate markets and bespoke projects. Aritra holds a Master’s degree in city planning from Indian Institute of Technology, kharagpur besides being an architect from school of planning and Architecture, Bhopal.

We would like the acknowledge the timely guidance and support rendered by Mr.G. Anand Reddy - vice president CRedAI Hyderabad and suggestions given by other members of CRedAI in developing the content of this publication.

sandip PatnaikManaging director, [email protected]+91 98851 84273

For information of Hyderabad please contact:

Ashutosh LimayeHead, Research and ReIs +91 22 3985 1319 [email protected]

For research enquiries, please contact:

Jones Lang Lasalle property Consultants (India) pvt Ltd © 2016. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

About JLLJLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $58.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang Lasalle Incorporated. For further information, visit www.jll.com

JLL has over 50 years of experience in Asia Pacific, with over 33,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards. www.ap.jll.com About JLL IndiaJLL is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across 11 cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 8500, the firm provides investors,developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, consultancy, transactions, project and development services, integrated facility management, property and asset management, sustainability, industrial, capital markets, residential, hotels, health care, senior living, education and retail advisory. The firm was awarded the Property Consultant of the Decade at the 10th CNBC-Awaaz Real Estate Awards 2015 and the Best Property Consultancy in India at the International Property Awards Asia Pacific 2016-17.For further information, please visit www.joneslanglasalle.co.in

Confederation of real Estate Developers’ Associations of India (CrEDAI) established in 1999, the Confederation of Real estate developers’ Associations of India (CRedAI) brings together more than 11500 Real estate developers from 156 city chapters across 23 states of IndiaCRedAI Hyderabad is the Hyderabad chapter of CRedAI, promoting real estate development in Hyderabad with a national impetus. CRedAI Hyderabad comprises a league of developers and builders who have over the years earned a reputation among buyers and investors.Aiming at taking the realty sector of the state to higher standards, CRedAI Hyderabad constantly strives to bring in the best practices prevalent in the industry nationwide in terms of innovative ideas, latest trends and standards in construction activities, and takes sincere efforts to maintain integrity and transparency in the realty sector. As an integral part of CRedAI, the apex body of organized real estate developers across India, CRedAI Hyderabad will voice and represent issues and proactive policies before the government and other concerned authorities. The association will seek to redress issues pertaining to taxation and stamp duty, promulgate prudent strategies for affordable housing and to provide good return of investment for consumers.

Documents

Hyderabad- Achieving New Milestones - JLL · PDF fileHyderabad- acHieving new Milestones ... in the existing building rules of the state ... rules (G.O. Ms. no 168, Md&Ud, dt: 07.04.2012