Telangana Land Funds Rework IRR Models Amid 22-A Overhang

Telangana Land Funds Rework IRR Models Amid 22-A Overhang

Hyderabad: Telangana land funds are quietly rewriting their internal rate of return models as the State’s prohibited property list under Section 22-A stands at 147,934 properties. The number is now big enough to change how investors price land, especially in growth corridors such as Kokapet, Mokila, Shankarpally, Tukkuguda, Maheshwaram, Medchal, Patancheru and Adibatla.

The immediate impact is not panic. It is repricing. Funds that were earlier underwriting 18-22% project IRR on plotted development or land aggregation deals are now testing lower exit values, longer holding periods and thicker legal-risk buffers. In our experience, the first question in investment committee meetings has shifted from what is the entry price to is there any 22-A shadow on the survey number, pahani, Dharani record or SRO history.

Section 22-A entries can restrict registration of certain properties, including government land, assigned land, endowment land, wakf land, court-disputed land and other categories notified by authorities. For a land fund, even a small portion of a larger aggregation falling under a prohibited category can disturb the whole business plan. The fund may still own clean parcels around it, but access roads, layout continuity, mortgageability and exit to a developer can get hit.

Why Telangana Land Funds Are Changing IRR Assumptions

The 147,934 prohibited-property figure is not just a compliance statistic. It has become a pricing variable. Land-focused investors are now assigning a probability-weighted discount to any parcel where the title chain, survey extent, mutation record or old assignment history is unclear.

Earlier, many land aggregators worked with a simple model: buy agricultural land, convert or structure for development, obtain approvals, and exit to a builder, plotted layout company or family office investor. That model still works in the right pockets. But the risk premium has moved up sharply in mandals where old revenue records are messy.

My reading is simple: land in Telangana is still a strong asset class, but blind aggregation is finished. Clean title, SRO traceability and 22-A clearance are now worth real money.

We are seeing three clear changes in fund models:

• Higher legal contingency: Many funds are setting aside 1-3% of land cost for title review, survey demarcation, revenue follow-up and document reconstruction.
• Longer exit period: Where a clean land deal earlier assumed a 24-36 month exit, investors are now testing 42-48 months if any mutation or prohibited-list clarification is pending.
• Lower terminal value: Exit prices are being cut by 5-15% in stress cases where the buyer may demand indemnity, escrow or phased payment.

Telangana Land Funds See 22-A Risk Differently Across Hyderabad Corridors

The risk is not uniform. A 22-A hit in a high-value western corridor creates a different IRR problem compared to a distant land bank with lower holding cost. In Kokapet and Neopolis, public auction rates have crossed the Rs 100 crore per acre mark, so even a small title uncertainty can block institutional participation. In Mokila and Shankarpally, private land quotes often range from roughly Rs 6 crore to Rs 15 crore per acre depending on road access, HMDA potential and proximity to the Financial District. In Tukkuguda, Maheshwaram and Adibatla, investors are tracking airport-side growth, ORR access and industrial employment, with agricultural and conversion-ready parcels quoted across a wide band of about Rs 3 crore to Rs 12 crore per acre.

These are market bands, not ready reckoner values. A fund will compare the quoted rate with the government market value using our Market Value / Guideline Value Search, then check registration cost through the Stamp Duty Calculator. The gap between guideline value and market quote is where both upside and risk live.

Section 22-A Check Is Now A Pre-Investment Condition

Earlier, some investors would sign an MoU first and complete title diligence later. That practice is reducing. Serious funds now want the survey number, village, mandal, extent, seller chain and SRO jurisdiction before issuing even a soft term sheet. They run an Encumbrance Certificate Search, verify the concerned office through Find Your SRO Office, and check the prohibited list using the Section 22-A Prohibited Property Check.

For land parcels, the survey number is everything. A spelling mismatch in village name, sub-division confusion, missing pahani entries or old mutation gap can delay diligence. Buyers can use our Survey Number Finder and Property Verification Tool before putting token money on the table.

Dharani has improved access to land records, but it has not removed the need for old-school verification. A clean Dharani screen is useful. Still, investors ask for link documents, old pahanis, ROR extracts, FMB sketch, mutation orders, tax receipts, EC, court-search inputs and SRO-level confirmation. Where development is planned, they also check land use through the Land Use Zone Finder and road feasibility through the Road Width Check.

How 147,934 Prohibited Properties Change Exit Planning

The biggest IRR damage usually comes at exit, not entry. A fund may negotiate a discount while buying. But if the final buyer, lender or developer raises a 22-A concern during exit diligence, the fund loses time. Time is expensive capital.

Consider a simple case. A land fund enters a 20-acre aggregation near Shankarpally at an average all-in cost of Rs 8 crore per acre, including purchase price, stamp duty, brokerage, legal and holding expenses. The base model assumes exit at Rs 12 crore per acre after three years. If two acres face 22-A clarification and the buyer insists on either exclusion or escrow, the fund may face three hits: lower saleable extent, delayed cash flow and legal cost. The headline land appreciation may look good, but project IRR can drop meaningfully.

This is why funds now prefer milestone-based payments. A seller may get an advance after document review, a larger tranche after EC and 22-A clearance, and balance after mutation or registration. Some deals are also moving to escrow structures where part of the consideration is released only after clean revenue and registration status is confirmed.

What Sellers Should Expect From Institutional Buyers

Landowners in Hyderabad outskirts should not treat these questions as harassment. Institutional capital has become stricter because one wrong survey number can disturb a full project. If the land is clean, sellers should organise documents before going to market. It improves bargaining power.

Keep these ready:

• Latest Dharani record and pattadar passbook details
• Old pahanis and ROR records wherever available
• Link documents for at least 30 years, if possible
• EC from the correct SRO
• FMB sketch, survey map and physical boundary confirmation
• Any court order, regularisation order or government correspondence
• 22-A status confirmation for the survey number and sub-division

For apartment or plotted layout exits, funds are also checking RERA status through the RERA Project Lookup. If the land is meant for high-rise development, FSI assumptions are tested using tools like the FSI/FAR Calculator. The return model is no longer only about buying cheap land. It is about buying land that can actually be registered, financed, approved and sold.

Investor View: Clean Land Will Command A Premium

The presence of 147,934 prohibited properties does not mean Telangana land is unattractive. In fact, the opposite may happen for clean parcels. When risk gets visible, quality gets paid. A clean five-acre parcel with proper access, clear EC, correct SRO record and no 22-A issue may command a better multiple than a cheaper but doubtful land bank.

We have seen this in western Hyderabad already. Developers prefer paying more for clean land in Narsingi, Tellapur, Osman Nagar and Kollur rather than getting stuck in endless title clarifications. Similar behaviour is slowly moving to the airport corridor and north Hyderabad.

For investors, the message is practical: do not depend only on seller claims, broker confidence or one screenshot. Check the revenue record, SRO trail, EC, survey boundary, land use and 22-A status before writing the cheque. The funds that do this properly may accept slightly lower headline IRR, but their realised IRR will be more dependable.