Hyderabad unlocks new realty markets as it leaps towards east

Hyderabad government rolled out policies to promote dispersed growth in all directions. Will these policies give a major facelift to realty growth in the city?

October 15, 2020

For the last two decades, realty development in Hyderabad enfolded only around the IT corridor in the western part of the city, which constitutes more than 90% of total office and residential inventory. In a bid to arrest this unbridled growth and reduce undue infrastructure pressure on western precincts of Hyderabad, the Government of Telangana rolled out new policies to incentivise development in other parts of the city. The Look East Policy (LEAP) was the first such initiative to develop a new IT corridor in the eastern part of the city, which would also attract new investments in residential, retail and hotel projects along with the office. The successful implementation of this policy, coupled with infrastructure development, has surged the real estate growth in the east of Hyderabad in the last two years.

The LEAP policy is curated to provide financial incentives and flexibility for both developers and IT firms. Some noted incentives of the policy include:

For Developers

  • Allows conversion of industrial parks to IT parks where the developers can allocate 50% of the area to
    non-IT purposes like residential projects, malls, hotels, etc.

For IT Companies

  • 30% rebate on rentals for IT companies leasing space
  • Special packages for companies that create more than 500 jobs

Since the inception of this policy, the eastern corridor experienced an increase in residential launches. The capital values of apartments also appreciated by 15% y-o-y in the last two years due to strong sales. In the last two years, east of Hyderabad saw the launch of 3,400 residential units in 14 projects, which is much higher than the activity seen in the last eight years before the inception of the policy. The period between 2010 and H1 2018 saw the launch of only 2,300 residential units in eight projects (Figure 1). Along with residential projects, the eastern quadrant has attracted multiple retail malls to cater to the demand of a large number of people living in the residential suburbs of Uppal, LB Nagar and Vanasthalipuram (Figure 2).

SRDP and Metro Rail as key infrastructure catalysts

To achieve objectives of any policy in real estate, it demands a parallel impetus in the development of urban infrastructure. In the last two years, Hyderabad Metro Rail (HMR) and Strategic Road Development Programme (SRDP) have given a facelift to residential suburbs in the east and bolstered the implementation of LEAP. While the metro rail network transformed the mobility of the city, SRDP revamped the road infrastructure in the eastern part of Hyderabad where major chunks of real estate projects were executed.

GRID to open new realty markets

The success of LEAP encouraged the state government to broaden the scope of the policy and launch GRID (Growth in Dispersion) Policy in August 2020. As per GRID policy, the state government aims to convert at least 100 acres of industrial parks into IT Parks over the next five years, and create 10 million square feet of built-up space and 100,000 new IT/ITeS jobs outside the western IT corridor of Hyderabad.

Outlook: New growth nodes to emerge

The multi-pronged strategy to proliferate the real estate in the city is expected to give rise to new nodes of development in other parts of the city. Five industrial parks with an area of 35 acres have already been converted into IT parks in the last one month in the eastern corridor. The state government is moving swiftly to create 35,000 new jobs in these parks. In the next 5-10 years, the city is most likely to witness an integrated development in locations like Uppal, LB Nagar, Kompally and Pocharam, similar to the development of Gachibowli and Hitec City.