Hyderabad, the capital city of Telangana has exhibited exceptional resilience to the fall in property prices recently. The city’s robust real estate structure is supported by the IT hub and government initiatives that helped the city emerge strongly from the stalled activities due to the lockdown.
Hyderabad’s real estate market has been steadily expanding, with increased demand for residential plus commercial buildings. The state government’s efforts to enhance infrastructure and increase connections have aided the real estate industry, and the city is also home to numerous important IT firms, which attract a huge number of employed professionals.
In the previous five years, typical property prices in Hyderabad have increased by a maximum of 10% each year. Despite this, it remains one of the cheapest cities in India for purchasing real estate.
The real estate reports by remarkable global real consultancies like JLL, and Knight Frank have indicated growth in the market size. Let us get to the overview of the market that witnessed turbulent graphs in the past couple of years.
Hyderabad Real Estate Overview 2023
Hyderabad’s commercial market witnessed tremendous growth despite the nationwide economic slowdown in 2019, a six-quarter decline in GDP, the longest spell in 23 years of history. Amid the tough times, the office space sector had scaled up with 13.2 million sq. feet of supply and the highest ever net absorption of 10 million sq. ft. HiTech city and Gachibowli have contributed to the absorption of these office spaces. The annual supply was double the five-year-old average supply. This demonstrated the city markets’ potential. The expansion of the tech giants like Facebook, Microsoft, and Intel spurred the demand.
IT-ITeS occupiers continued to be the primary demand driver for office space in Hyderabad, accounting for 39% of total leasing. Manufacturing and industrial occupiers have gained market share, accounting for 22% of the market, with co-working providers accounting for 21% of the office leasing market.
No less was the residential market, with the newly launched projects and successful sale history, the year was marked with positive market trends. The project launches increased by 63% year on year while the sales recorded an increase of 47% year on year. A 21% annual growth in sales was observed with a dip of 16% in the unsold inventory. This shot the capital as it appreciated by 9% year on year.
Let us see the 2023 Hyderabad residential and commercial real estate market below.
Hyderabad Real Estate Market 2023
Like all the cities, Hyderabad did experience a halt in the transactions and construction of the projects due to the lockdown. But the city bounced back with the sales recording positive growth and the city held a share of 30% in the office spaces towards the end of the first half of 2020.
Hyderabad has a significant share in the country’s office space absorption. The city has the least unsold inventory among the leading cities’ markets in the country. This stands as a testimony to the strong sales that the city has witnessed.
Let us get to each of the markets in detail.
Office Real Estate
- Hyderabad added over 8.2 million square feet of new office space in H1FY23, the city’s biggest ever new office supply in the previous six years. The city accounted for 34% of new office space flooded across the top 7 Indian markets.
- In terms of net office absorption, Hyderabad had the second largest (21% share) in the country with 4.03 Mn sf in H1FY23. The city also saw the biggest YoY growth in net office space absorption, at 152%.
- In H1FY23, the average citywide office rental was INR 61/sf/Mo. Due to a robust injection of new office space into the city, office vacancy levels increased modestly by 0.7% to 15.9% in H1FY23.
- IT-ITeS occupiers continued to be the primary demand driver for office space in Hyderabad, accounting for 39% of total leasing. Manufacturing and industrial occupiers have gained market share, accounting for 22% of the market, with co-working providers accounting for 21% of the office leasing market.
Residential Real Estate
What is the scene of Hyderbad’s residential real estate in 2023?
- According to recent data, Hyderabad recorded 5,274 residential property units in February 2023, with the total value of properties listed in the month standing at Rs 2,816 crore.
- According to Knight Frank India’s most recent assessment, registration of house sales fell by 3% year on year in February, while registration income collections fell by 1% year on year.
- Hyderabad’s residential market is divided into four districts: Hyderabad, Medchal-Malkajgiri, Rangareddy, and Sangareddy.
- Registrations in residential units priced between Rs 2.5 and 5 million (Rs 25 and 50 lakhs) continued to be the most common, accounting for 51% of all registrations in February 2023.
- In February 2023, the percentage of demand for tickets priced just under Rs 2.5 million (Rs 25 lakhs) was 18%, unchanged from the previous year.
- The cumulative proportion of sales registrations for properties with ticket sizes of Rs 10 million and higher (> Rs 1 crore) grew to 10% in February 2023, up from 8% in February 2022.
- The percentage of registrations in homes sized 500 – 1000 square feet climbed to 18% in February 2023, up from 14% in February 2022.
- While the percentage of homes sized 1,000-2,000 sq ft remained the greatest in February 2023, with a total share of 68%, it was lower than the 73% seen in February 2022.
- The survey found that home sales registrations were highest in the Medchal-Malkajgiri area (43%), followed by Rangareddy (39%). In February 2023, the Hyderabad district had a 15% share of overall registrations.
- In February 2023, the weighted average price of transacted residential homes climbed by 3% year on year.
- Sangareddy district experienced the largest YoY increase of 9% in February 2023, suggesting that more higher-value properties were sold in this area during this time period. In recent years, the Hyderabad market has experienced a rapid price increase, with higher-value properties selling in February 2023.
Opportunities in the Challenges
The challenges brought by the pandemic have paved the way for the opportunities which make Hyderabad’s Real Estate industry perspective.
- Hub and Spoke Model
This is the business model that can be used for the decentralization of businesses. The Look East Policy and the growth in dispersion are some of the government initiatives that are brought in support of this model. This led to the expansion of the IT sector rather than being concentrated in some parts of the city which hampers the growth in the other parts of the city.
- Urban Infrastructure Development in Fringe Areas
The urban infrastructure has to be developed and upgraded for the industries to spread and disperse. For instance, the companies allowed work from home during the pandemic ensuring the required infrastructure like continuous power supply and appropriate data connection. Hence the infrastructure development in fringe areas impacts the IT companies to shift to the other parts of the city where the government intends to develop and grow in dispersion.
- Development of Economic Base and New Economic Hubs
The state’s economy is dependent on the IT sector which accounts for approximately 65%. The state is planning to enhance other streams like Pharmaceuticals, Automobiles, Healthcare, etc to increase the business and ensure all-around development through diversification.
The markets of Hyderabad are expanding at a great pace as revealed by the office market. Hyderabad has the potential to go further supported by government initiatives. Hyderabad’s markets are independent as exhibited in the year 2019. This attracts global tech giants to establish their businesses and run profitably. This led to tremendous change in the cityscape and the Real Estate markets.
End-user demand is anticipated to propel the year 2023, yet serious long-term investors will find market dynamics to be much more positive.
Hyderabad Real Estate Market FAQ’s:
Hyderabad Real Estate is exhibiting good resilience to the fall in property prices in challenging times like pandemic. The office space market and the residential market have shown an excellent performance in the previous years.
Hyderabad has various areas to invest in like Gachibowli, Hitech city, Kukatpally, Ameerpet. These are developing at a faster pace and due to the connectivity to the markets, these markets are high on demand.
Hyderabad has the optimal location and landscape that attracts companies to establish their businesses. The government initiatives also help the companies easily establish and run profitably.
The land prices in Hyderabad are increasing due to the influx of working professionals as the IT hub strengthens every year. The other sectors like automobiles and pharmaceuticals, retail are equally developing. This leads to the shoot up in the land prices.