Real estate prices up 40-125 % in 3 months. Driven by demand for quality office space, commercial property rates in Hyderabad have been on a northward spiral. Commercial real estate prices in the Pearl City have grown between 40% and 125% in the three-month period ended January 2007 as compared to almost flat growth in other IT hubs like Bangalore and Chennai during the period, according to a Cushman and Wakefield report as on January 2007.

For instance, in central business districts (CBD) like Begumpet and Raj Bhavan Road, price of office space has shot up by 40% in the three-month period ended January 2007 as compared to the rates in the previous three months. In posh suburbs like Banjara Hills and Jubilee Hills, closer to the IT hubs like Madhapur, Hitech City and Gachibowli, commercial property prices have gone up by almost 125%, according to the report.

Prices in most part of Bangalore including the CBDs and suburbs like Koramangala and Whitefield have mostly been flat in the said period. In Chennai, meanwhile, CBDs posted an average growth of 15% with suburbs like Guindy and OMR posting near stagnant growth. The shortage of readily available office space in Hyderabad, attributed to its relatively late entry in the IT space, could be the reasons for the sudden spate in rates, according to industry analysts.

“Readily available space is very essential for commercial ventures and since it is short in supply in Hyderabad, the demand for it naturally goes up resulting in higher prices. Once supply starts coming in, rates will eventually stabilise. The price escalation in Hyderabad will continue and is expected to minimise only after a year now,” reasons an analyst with a real estate tracking firm.

The supply scenario is also on the lower side in the city. While Bangalore and Chennai are expected to supply 16 million sq ft and 12 million sq ft office space in 2007, the availability in Hyderabad is estimated only at 3.8 million sq ft, which explains the acute shortage of quality office space in the city.

The rampant expansion by retail players is also adding to the supply constraint industry sources say. “Hyderabad is certainly on a high growth phase. But the overall growth is on a small base. Hyderabad today is what Bangalore was two to three years ago. So the growth seems huge,” points out Prakash Gurbaxani, CEO of VC backed realty firm, QVC Realty.

Economic Times