Why_Hyderabad A lot of people have been asking me why I am doing a venture in Hyderabad only. The main reasons are: 1. I am from Hyderabad, so I can do better due diligence and also ensure safety of your investment over a long period in a more cost effective manner 2. The price of land with-in 40 minutes travel time from any IT Park in all other cities is already very high – around Rs 1000 per sft. Hyderabad is the only exception where I am seeing the price to be affordable in the range of around Rs 100 per sft. If you buy land costing Rs 1000 per sft, it may take longer time to double or become 10 times compared to the time taken for land costing Rs 100 per sft to become double or 10 times 3. The prices of land have remained subdued in Hyderabad for the past 3 years due to political disturbances. A lot of people from Coastal Andhra were owning properties in Hyderabad. They feared that their properties would be targeted by the local Telangana people after bifurcation of the state and they started selling in panic. The prices of land actually went down in Hyderabad in the past 3 years. But now the decision has been taken that Hyderabad will be the joint capital for Andhra and Telangana for 10 years. The prices of land will now increase sharply to catch up with the prices of land in other parts of the Country. To enable you to understand the Point #3 mentioned above more clearly, I will elaborate further: 1. Assume someone had invested Rs 10 lakhs in land in Hyderabad and in Pune or Bangalore 3 years ago. The prices of land in other parts has gone up and your investment of Rs 10 lakhs is now worth over Rs 15 lakhs. But the prices of land in Hyderabad actually went down and your investment of Rs 10 lakhs is now worth only Rs 8 lakhs. This differential has been caused due to the political disturbance in Hyderabad. But now normalcy has been restored and the prices of land will race up to catch up with the prices of land in other parts of the Country. So your investment of Rs 15 lakhs in Pune or Bangalore may increase to Rs 30 lakhs a few years down the line. Your investment of Rs 8 lakhs in Hyderabad should also increase to Rs 30 lakhs in the same period to make up for the lost time. 2. Assume IBM wants to expand in India and employ 1000 additional employees. Assuming they require average 100 sft office space per employee (including common areas, training rooms, Cafeterias, Rest Rooms, etc.), they will need 1,00,000 sft office space. I know a lot of buildings are readily available in Hyderabad with 1 lakh to 5 lakh sft built up area, and the owners would be happy to rent out @ Rs 35 per sft. The rent would work out to Rs 35 lakhs per month. The rent for a comparable building in Gurgaon / Pune / Bangalore / Chennai would be over Rs 70 lakhs a month. So, if IBM can save over Rs 35 lakhs per month by expanding in Hyderabad compared to other cities, the preferred destination would be Hyderabad. I expect an additional 3,00,000 employees would be gaining employment in Hyderabad in the next two years. They would need place to live. So, the prices of residential real estate will also spike to catch up with the rest of the Country. Now the question remains, why Warangal Road? And why not Hi-Tech City area? Till now, most of the IT companies had set up offices in Hi-Tech City / Gachibowli area. This area has become super saturated and the prices of land with-in 40 minutes travel time has gone up to over Rs 1000 per sft in that area. The area between Ghatkesar to Bibinagar has been declared as the new IT Region of Hyderabad. Infosys has already acquired 450 acres of land and is constructing a huge office which will employ 50,000 people. The construction work is going on in full swing and already 9,000 employees are working in that location. Raheja Mindspace has also acquired a huge chunk of land next to Infosys Campus and they too plan to have around 1,00,000 employees working for different Corporate in their buildings. Genpact has also set up an office nearby. I expect around 2,00,000 employees will start working in that area and all of them will need place to live. Besides, the infrastructure has already been fully developed. The road from Infosys Campus towards Warangal has already been developed into an International quality expressway with proper exits, ramps and underpasses. Therefore, I expect the prices of land to move up sharply in that area.
Posted on: Tue, 27 Aug 2013 01:48:11 +0000
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