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2009 Election / Telengana Impact on Real Estate. HYDERABAD,INDIA - APRIL 2009
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2009 State Election. Possible Scenarios of Govt formation and Impact on Hyderabad Real Estate

This article analyses the possible post-counting scenarios of Govt formation, in Andhra Pradesh and the likely policy of future Govt. on Telengana, which would impact Hyderabad Real Estate Market .........Exclusive Ventures -Apr 2009
1.0 Vote is Sealed. What is in Store for Hyderabad Real Estate?

Elections this year have been unusually long. The votes were cast on 16th and 23rd of April. The votes will remain canned till 16th May. Its really a pain to wait so long. Year after year, the Election Commission is taking the matter of influence on remaining polls to ridiculous levels. Though the exit polls have always proved to be out of line by miles, at least that was "time pass". In the meanwhile, politicians and officers have nothing to do, except watch IPL.

From April onwards, real estate activity has almost ground to a halt. Its natural that people would wait and see how things unfold, before putting in money. This is a fact on the ground and no builder can expect people to be so naïve that they would come and keep buying.

After the elections, once the dust settles, we should see recommencement of activity. May be there would be a period of low rates before the upward movement starts. Also there is general view on the street that economy could be improving, driven by the news of large upward movement in stocks and the trickling news that things could become better in US, by the end of the year. Its important for buyers to track price movement and pick properties before the prices escalate (whenever it happens) 2.0 The Forgotten Telengana is Lurking in the Background!

After being hot for few years, when it actually came to voting, people were damn cool about Telengana. It was indeed surprising that no political party including TRS could do anything to make people passionate, for or against Telengana during the campaign period. As we had mentioned in previous report, TRS did not even release an election Manifesto outlining its commitment to Telengana. There was no fire works at all. In fact, TRS was happy marketing Naidu's schemes like free TVs and Cash Transfer Scheme.

Till the first phase of polling (First Phase basically cover Telengana Region), all Parties including congress declared their 100% support to Telengana. Congress was confident that it would steam roll everyone else since PRP will split Naidu's votes and TRS would get marginalized due to poor Telengana sentiment.

But the large voting percentage and the stream of whisperings from across the constituencies that TDP is on a roll, got YSR on the back foot. He was suddenly shaky and he felt he had to get more in Andhra and Rayalaseema, to remain in power. And YSR was out with the outrageous statement that the Telenganas will drive away all others and will not even give water to Andhra people, if congress does not win. The statement was flashed across the state, and suddenly, people remembered that there was something called Telengana and started jumping around!

KCR was quick to dump Naidu's free TVs and jump-in, considering the opportunity to thrown to him, by YSR. Last heard, he is actively wooing all, including BJP, indicating that he is ready to dump Naidu and CPM, after the votes are counted.

3.0 Possible Scenarios after the counting.

The best scenario for Real Estate industry would be to see YSR back in the Chair. This will stifle Telengana movement since he will project the fact, that during polls, people were not very enthusiastic for Telengana. Congress's return will give stability to the Real Estate market and will hold land prices from falling, since people would understand that Telengana movement do not have depth and wide-spread emotional appeal.

In all other cases, there will be prolonged period of uncertainty. Telengana formation during next 5 years looks almost impossible, even if Congress is booted out, and others come into power. But TRS could drum up lot of noise, if TDP is in power, which can cause land and property prices to fall, around Hyderabad.

There are several possibilities considering the three-way contest. Also, deep in their hearts, neither YSR/ Naidu nor Chiranjeevi would want the state to split. The fear of possible loss of control, over half the state, will drive Parties to change their stand. After all, in politics, change is perpetual! Lets see how things would pan out.

3.1 Congress Wins Majority and Forms Govt

Well…that would be the end of Telengana dream at least for another 5 years. If we look back, TRS could do nothing during last 5 years. Let alone make Telengana a mass movement, by the end of 5 years, people had all but forgotten the issue. Moreover TRS made an ass of itself, by getting into human trafficking controversies, apart from losing most of its elected representatives.

Real Estate industry will definitely rejoice. At least there will not be further crash, though its unlikely that any upward movement would happen, in the short /medium term. But definitely there will be sales and builders would be able to make ends meet!

3.2 TDP wins majority without considering TRS seats.

Though TDP had assured that they support Telengana, Naidu will stand to lose since in Telengana Region he will not have sufficient MLS to form Govt there, if the state is split into two. He will end up with Andhra/Rayalaseema and he will have to crown KCR as king in Telengana. Does the thought give a pleasant feeling?

Put yourself into Naidu's shoes! After having brought about a fantastic victory, after struggling for 5 years, after cycling the entire length and breadth of the state over the last few years, after dumping IT & vouching to give free salary to all the poor, will Naidu gift away half the bounty, to his foe, KCR?

Naidu is no Gandhi, that is for sure! So the Real Estate industry could still heave a sigh and escape from being exposed to perpetual diarrhea.

3.3 TDP wins majority BUT with TRS MLAs as collision partner

This is the situation that KCR is dreaming off! Get votes with Naidu's schemes of free TV and Cash transfer and then get Naidu to split the state. Since Congress & PRP could combine and pose grave threat, Naidu will have to agree to go with KCR. But this will be an absolutely bitter medicine that Naidu will try his best to avoid gulping. Once gulped, this will surely burn the internals, splitting open old ulcers which would make every TDP leader, to throw up.

Naidu will have some comfort if Congress forms central Govt. In such case he can blame it on the center for not bringing in the required legislation. If the central Govt is of BJP or third front and KCR is able to influence it, then Naidu will be hard pressed. He will try his best still to avoid. How the political drama will unfold is hard to predict. It may take long for clarity to emerge.

One thing is for sure, there will be abundant uncertainty for quite sometime, which will impact real estate activity in Hyderabad. Prolonged period if low buyer interest will affect new projects which would it hard to get sufficient bookings to complete construction. Definitely in such case, the industry could be lining up for life support.

3.4 TDP Dumps TRS and forms Govt with PRP

Lets not laugh at the suggestion! There is nothing impossible in politics. PRP will not be able to keep its flock together for 5 years with no power. What do the masses get from Chiranjeevi after their support. To feed his following, he needs free money which can only be routed through Govt. schemes. And this will drive PRP to align with TDP or even Congress, if it comes to that.

This will push TRS into corner and left alone, it can do nothing. History has already shown that unless there is 100% concurrent commitment from the ruling Govts in Hyderabad and Delhi, the state can not be split. If TDP and PRP come together, what do they get by splitting? Rather they would lose half the state to others. In fact, in the Andhra State(after the split), TDP will find PRP to be a big and powerful partner and hence a major threat. And hence TDP will want PRP to come in, without Telengana baggage.

PRP has committed to support Telengana but when the question is either support Telengana or get into Govt and feed its supporters in Andhra for next 5 years using Govt. money, which option will PRP choose?

PRP would want to publicly project that its for Telengana while staying in Govt. Obviously, there will be uncertainty in the Real Estate market. Developers will gasp for breath and will have to come up with innovative pricing schemes to stay alive, till stability arrives.

3.5 Congress Manages to Outwit Naidu and get PRP support to form Govt.

The situation will be similar to that above. For PRP it does not matter at all whether it forms Govt with TDP or Congress. It only needs money to flow it its cadre for next five years. Pre-election commitments will go for a toss and Telengana will be pushed into the attic. Again, there will be enough uncertainty to make builders lose sleep. They will have to wake up to months of pain and cut prices to bring-in buyers or take a break from the business.

These are the possible scenarios. May be there are others too, like PRP's dream of forming Govt on its own?! Comments are welcome!    Email:

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