The boom in Hyderabad real estate market has moderated in the past few years. With the announcement of separate Telangana state, it has slowed down further. Many of you may find it as the right time to buy some property in Hyderabad. But we believe the other way. We have a few reasons which could clearly tell you why not to buy real estate in Hyderabad.
Real estate in GHMC itself has skyrocketed in last 10 years
As recently as 2000-2003, realtors could buy land at Rs. 2 lakh – 10 lakhs/acre (Rs. 40 – Rs. 200/yard). These rates have now shot up to Rs. 6,000/yard.
Even assuming that there is a steep 30% dip in prices, instead of selling it for Rs. 6,000/yard, they sell at Rs. 4,000/yard. Their money would have multiplied almost 100 times in about 10-12 years or at least 40 times.
Taking this lower growth rate, an investment of 10 lakhs becomes 4 crores. With 4 crores an acre, they can buy about 100-200 acres in some developing area of Seemandhra. Repeating the same over the next decade in another city or state.
Like hedge funds, these real estate operators serve nobody except their greed. As they grow wealthier, a middle class person needs to pay EMI’s an additional 10 years or live within a cramped house. They serve no purpose except increasing the stress and pains of normal people living in Hyderabad.
Development at Hyderabad could be more broad based
Certain areas of city may have got too much interest and all projects could have been diverted to this part of city. This could be corrected. Without new investments regularly, an area does not seem happening anymore and prices in such places may move much slower than other areas.
Lack of political patronage may block your investment
It is an open secret that politician in power tries to disadvantage a political opponent by creating some hurdles in their projects, land holdings to prevent them from having a monetary advantage. Whether your investment is in such area or near that area, your investments will suffer badly.
Taxes may increase to support government
Lot of demands are being made by people from all districts of AP thus Hyderabad revenue may be shared. This means taxation may increase. In Telangana state, it is possible that open land that is not in agricultural use but made as plots could be taxed to support basic amenities. Then your plots may become white elephants that drain your income while locking your savings.
Land being sold now may have issues
Most large holdings are violation of government acts/rules. With political back-up, big real estate investors used to maintain them illegally. If you buy them now, you may later realize that you have not only purchased it for high price but also bought an illegal land, which was in violation of law for example surplus land, assigned land, government land, wakf land, endowments land, etc. So, the title of ownership does not pass on to you and your investment may be locked up in litigation.
What to do now?
- Be wary of external influences and hypeWhen everybody around you – your relatives, friends, neighbours, colleagues etc., are buying real estate, you may feel like you are missing out something. But there is nothing to worry about. If possible, try to educate them and ask them to see the reality.Further, many newspapers continuously create articles about increase in price. You keep on hearing about the prices going up or down in media. But don’t believe them. They are trying to support the prices by creating a wrong picture.
- Drop in real estate prices will be beneficial to middle classDrop in prices may not be an issue as it allows regular people to own a decent house at affordable prices.While newspapers and unscrupulous journalists always boast of rising prices of real estate, for regular people, it is problematic when prices rise as they need to make a compromise by living in a single bedroom apartment because they cannot afford a two bedroom apartment due to rise in real estate prices.
So, for regular people, a real price drop may be good and it could even boost the economy as many people will buy bigger homes and lot of workers are needed for working on building lot of bigger homes. More cement will sell and more house construction equipment will be needed. This increases the jobs and helps the economy.