A new luxury residential project by a prestigious realty company is set to launch in Nanakramguda in October, and even before the official launch, the project is reportedly generating considerable buzz. There is talk in the market that advance bookings are moving quickly, with buyers showing strong interest in the project.
But the excitement comes at an interesting time for Hyderabad’s luxury housing market. In the same Nanakramguda and Financial District belt, several gated community projects already have apartments lying vacant. A significant number of these homes belong to NRIs and investors who purchased properties with the expectation of capital appreciation or rental income. Finding tenants willing to pay rentals that match the cost of luxury community living has become increasingly difficult.
Against this backdrop, the reported launch price of around Rs 11,400 per sq ft for the new project has surprised several market observers. Once various charges, amenities, parking and other additions are factored in, the effective acquisition cost could reportedly reach around Rs 13,500 per sq ft.
The bigger question is what happens after that. Buyers may have to pay the entire amount over the next two to three years, while handover could take another three to four years. For an investor entering at an effective cost of around Rs 13,500 per sq ft today, some realtors argue that the property would need to reach at least Rs 20,000 per sq ft by possession simply to make the numbers work after factoring in the cost of capital. To generate a meaningful profit, the required selling price could be closer to Rs 25,000 per sq ft.
That is where the optimism starts looking aggressive.
“Every project cannot see appreciation like the iconic My Home Bhooja. Seeing that performance, many people are blindly investing in every new project assuming similar escalation after five years. It is fine to buy if someone has the money and genuinely wants to live there. But buying purely for investment or rental income is a different proposition,” said a CEO of a software company in Hyderabad.
“Coming to the hype, in the film industry we have platforms like BookMyShow that give us a sense of whether the buzz created by filmmakers is translating into actual ticket bookings. But we do not have the same level of transparency in the real estate market. When developers claim that a project is witnessing strong demand or advance bookings, consumers have very little independent data to verify those claims. Ultimately, they are left to decide whether to believe the promoter or not,” he added.
Another investor's experience offers a cautionary example. “My NRI cousin and his NRI nephew invested together in an ultra-luxury project, hoping to sell after completion. They started investing three years ago, and the project is still awaiting handover. Looking at current demand, they realised they may not even get close to break-even if they sell soon. They now need another major boom to see meaningful returns. They often say they might have been better off investing the money in US stocks or other long-term financial products. The depreciation of the rupee against the dollar has made the investment look even weaker in dollar terms,” he said.
Rental returns also remain a concern. Many luxury apartments in gated communities are still vacant because the tenant pool willing to pay premium rents is limited. Some investors rely on professional networks and social connections to find tenants. Others simply keep their apartments locked.
The Nanakramguda launch may still succeed if end-user demand remains strong. But the bigger question is whether Hyderabad's luxury real estate market can sustain the extraordinary appreciation expectations now being built into property prices.
