Real Estate Outlook in India/Hyderabad/Shamshabad

According to a statistic India churns out 350000 engineers (one third of the entire world estimated to produce 1 million annually), 70000 MBA’s and close to a million graduates every year. Five states -- Tamil Nadu, Andhra Pradesh, Maharashtra and Kerala -- account for 31 percent of India's population, but 69 percent of India's engineers. India boasts of 306 universities and 15000 colleges. Many people bet on India’s generation young as we are the only nation with a huge segment of the total population between the age group of 20 – 35 years. India is young and India is booming, firing positive outlooks for almost all the industries/sectors, ushering in an impressive middle class segment with a lot of buying clout. The Indian economy is showing signs of 9% GDP growth to be sustainable in the next decade or so, which is a result of growth across sectors like IT, BPO, manufacturing, pharma. This in turn results in more real estate activity thus ensuring this spurt in real estate activity to be more fundamental by nature than purely being speculative. We are already talking about IT exports touching $60 billion dollars by 2010. Software exports stood at around $24 billion in 2006(Nasscom). The $60 billion target represents a compounded annual growth rate (CAGR) of 26.3 %. Similarly the Indian BPO segment contributed $6.5 billion to the total software and services exports and this is to cross $ 8 billion in 2007. Another area of great activity is Indian tourism industry, which has the potential to grow further by 50-100 percent annually. The country’s economic boom and growing emergence as an important world entity in various business activities are set to positively impact the very bad infrastructure that we currently account ourselves with. The new liberalized laws in Indian real estate sector are set to bring in more foreign Direct Investments (FDI). As the infrastructure in most parts of India is ageing and very poor, India is in dire need of upgrading a broad section of its infrastructure. An estimated investment of $35billion is required for road development, $55billion for installing new telecommunication networks, and $8billion for ports modernization over the next 8 to 12 years.

The Indian government’s encouraging policies, which include the liberalization of foreign exchange controls, tax benefits for first time homebuyers, more conducive lending rates and reforms in the real estate industry, have contributed substantially to the growth of the real estate sector in recent times. According to the industry experts the real estate growth is going to play a big part in the overall service sector growth in Indian economy. Real estate investments were very limited, representing only 2% of the total GDP in 1995, compared to 4.8% of GDP for the Chinese real estate market. Real estate investments have been steadily rising since, and were 2.7% of GDP (2004 figures) in India as compared to 6.5% in China. A.T. Kearney's analysis of the Indian real estate market using the 'global industry curve' indicates that this ratio for India can potentially go to 4.2% in 2010, at a compounded annual growth rate of 14.3%. The latest FDI figures for 2006 talk about $2.5 billion investments in Indian real estates out of the total FDI receipt of $ 8 billion, roughly translating to around 27 % share of FDI in real estate for 2006 alone. According to a 2005 survey by Merrill Lynch, organized retail, which accounts for just two per cent of the $200 billion sector, will grow from $4 billion to $15 billion by 2010. Real estate sector in the same time frame is expected to grow from $12 billion to $50 billion.
To promote FDI in the real estate sector, the government had last year allowed 100% FDI in the property and construction sector. Previously, any foreign investor wanting to buy real estate must get the approval of the Reserve Bank of India. The site involved must be more than 50,000 sq ft, and it must be a new construction. Coupled with the opening up of real estate funds to foreigners, this would result in more professional players, bigger projects and more transparency in the industry. Foreign investors can now invest in commercial real estate development projects that have a minimum built up area of 50,000 sq m while the minimum area threshold for FDI in integrated townships has been reduced to 25 acres from 100 acres previously. Wholly-owned FDI projects must have a minimum equity investment of $10 million while for joint ventures it is $5 million. In today’s real estate market in India the biggest challenge is to have a good land Bank and sufficient capital for funding the projects. Given that land banks in metros are fast diminishing, satellite townships are emerging. The Indian reality sector has shown some basic changes like the companies going public to raise funds, corporatization, and from being project and location specific to expansion to other geographies. This has helped the customers, as they find the real estate firms to be more transparent and committed to the project execution.
Hyderabad
Andhra Pradesh, one of the bigger states in India has a huge pool of highly qualified manpower with 29 universities producing 55,000 engineers, 110 polytechnics and 563 industrial training institutes turning out thousands more skilled workers every year. Andhra Pradesh is well connected to major Indian cities like Delhi, Mumbai, Bangalore and Chennai. Andhra state is home to various emerging industries like bulk drugs/pharmaceuticals, horticulture, poultry farming, spices mines/minerals, textiles/apparels and now IT. Emerging cities like Hyderabad (capitol to Andhra state) are drastically changing the face of urban India coupled with economic liberalization; such cities are engines of economic growth. Hyderabad is known for its rich history, culture and architecture representing its unique characteristic of a meeting point for North and South India, and its multi-lingual culture, both geographically and culturally. Hence, Hyderabad is considered to be the gateway of southern India. Hyderabad has also been referred to as the second silicon valley of India next to bangalore. With a population of approximately 6.5 million (65 lakh), it is India’s 5th largest metropolis and the 41st largest metropolitan area in the world. Hyderabad has a cosmopolitan culture and a very affordable living standard compared to other competitors like Delhi, Mumbai, and Bangalore. Hyderabad actually involves twin cities of Hyderabad and Secunderabad and also has many upcoming satellite townships like Shamshabad (the location for the new airport), Gachibowli, and Uppal etc. Hyderabad is the emerging IT /Biotechnology hub of India and has a very strong background in entertainment industry. Hyderabad has initiated a whole host of investment friendly initiatives from the governments of the past and present for almost a decade now, including a mix of public, private and private-public participation. Some of these are the ambitious Shamshabad international airport, the longest flyover in India, the IT hubs in Hi tech city, Gachibowli, Uppal, Shamirpet, the genome valley Biotechnology hub, Semiconductor Park and the Outer Ring Road (ORR) project. Like many Indian cities, Hyderabad has witnessed a remarkable growth in the real estate business, thanks to a predominantly information technology-driven boom in the 1990s and the retail industry growth over the last few years which have spurred hectic commercial activity. A number of retail malls have come up or are being built in the city. According to the latest estimates the IT exports from Hyderabad alone for the year 2005-06 is to surpass Rs. 12500 crores ($ 2.5 billion). The investment friendly government has also ensured extensive investments in the digital infrastructure within the city promoting the setting up of various educational campuses by a vast array of firms. Some of the very notable educational investments in pipeline being – Vedanta university, Birla campus, many prestigeous US universities etc.The city hosts two Central Universities, two Deemed Universities, and six State Universities.
Shamshabad – the future outlook
Shamshabad, located on the southern outskirts of Hyderabad is home to the state of the art airport project underway with active private public participation to meet the growing demands of the city. Currently the biggest project in Hyderabad, once completed the airport widely tipped to be among the best in Asia having world class facilities is expected to cater a total of around 7 million passengers per year in the intial phase and finally upto 50 million passengers per year. The project is well on course to complete its first phase in March 2008.This multi million dollar project is being built in an area of around 5,500 acres of land and will have the longest runway among Indian airports.Teh new airp[ort project also envisages plenty of real estate development within the airport like hotels, convention centers, shopping malls/entertainment complexes and Free Trade Zones etc. There is laso going to be a lot of business activity with regards to the adjacent Air Cargo comples and an MRO(Maintenance Repair and Overhaul facility) near or inside the airport. Hence, Shamshabad is witnessing many related investments in the area of hospitality, education, IT, ITES, Biotech parks, business parks, Special Economic Zones (SEZ) and housing coming up in and around the new International Airport. The Fabcity investment alone is around $3 billion and promises to generate an emplyment of around 1.5 million people by 2015 (both direct and indirect). The Fabcity project spanning over 1500 acres of land, being developed by a consortium of firms including both AMD and Intel, will open up a new business avenue of high end chip designing/testing and manufacturing, currently manufactured in few countries only. This is an extremly important project for India as it takes the Indian economy into the next level of the business learning curve. The second phase work on Fabcity project is set to commence from April 2007. Government of Andhra Pradesh has allotted close to 5000 acres of land for Software and Hardware park near Shamshabad ensuring a slew of MNC investments into these parks..

Other Related Investments in Shamshabad

The Mucherla IT park, located around 14 kms from the new airport has 850 acres of land, where 20 acres have been allotted to dell.Infosys is setting up a 550 acre campus, the biggest software facility in India, work foir which is supposed to begin soon sometime in 2007.

Amusement Park - Asia's biggest Amusement park being developed close to Shamshabad airport is to attract thousands of tourists everyday.

Apparel Park – Spread over 176 Acres of prime Industrial land complete with banks, post offices, exhibition halls and shopping complexes is a conglomeration of several garment making units. Dubai Garments companies such as Vetco, Atraco and Cristal Garments located in Jabel Ali Free Zone have already decided to shift their operations to Apparel Park.

Videocon Project – Videocon International, the country’s largest Consumer electronics manufacturer plans to pump Rs. 500 Crores into its state of the art manufacturing facility in the next 3-4 years.

Astra Micro Wave Products Ltd – Engaged in the manufacture of Communication related products including radar subsystems for defence and telecommunication sectors has embarked on a plan to set up its third plant near research centre Imarat.

International University - 100 Acres allotted for the International University in Hyderabad will provide quality education for International scholars. The International University is sure to attract nearly 10,000 international scholars every year.

AP Housing Board Township – Proposed 125 Acres township with Malaysian collaboration. In addition HUDA (hyderabad urban development authority) plans to auction a mega venture of 350 acres and develop a 600 Acres Township at Maheshwaram Mandal.

Catalytic Software Systems Company - Seattle based Catalytic Software Inc.
is all set to establish their development facility at Kancha Imarat The proposed software development centre-cum-township will provide employment to around 4000 IT professionals and have over 4000 houses for employees’ residential accommodation.

Nova Park – 3000 Acres of land has been allotted near the hardware park for the proposed NOVA Park.
According to real estate experts once the adjacent ORR (Outer ring road) project is completed the existing prices in and around Shamshabad like Kothur; Mansanpally could go up by another 20-25 percent. The ORR project is a six lane express way encircling Hyderabad city and runs very close to the Shamshabad Airport. The dedicated airport rail link between Begumpet and Shamshabad will bring down the travel time from the city center to Shamshabad by more than 50 % and will also provide connectivity to the other big projects in and around Shamshabad airport. There have been various pending proposals for more real estate activity in and around Shamshabad. The rail link modeled on the lines of the rail corridor in Hong Kong and London could bring down the average travel time from 90 minutes to 22 minutes. Andhra Pradesh government has recently sabctioned the Shamshabad Police Station as the biggest police station in Hyderabad with a force of more than 200 personnel and this facility will also be the most modern police station in the state.
MMTS(multi model transit system) Railway Station - The main MMTS Railway Station in Timmapur directly links this zone to the Cargo hold of the International Airport. With a sanction of 230 Crores for the development of Timmapur MMTS Railway Station, work is progressing at a rapid pace. What’s more, the Outer Ring Road coupled with the Express Highway and MMTS Railway connectivity will lead straight to the IT Hub of Gacchibowli and Madhapur. For the area, it will mean a straight access to the future.
Bibliography –
1. Google
2. Wikipedia
3. Indiatimes
4. Rediff
5. the new Hyderabad Airport website
6. AP government websites