Preparing for a quantum leap

Hyderabad real estate market is gaining national importance with the advantage of affordability and infrastructure development. Construction Times provides an overview of the market.

The Indian real estate market has seen some turnaround in sales in the post-pandemic period across the country. Both residential and commercial segments have seen some upward push during the period. While there was a slowdown in affordable housing segment last year, luxury segment has seen a considerable growth last year. Compared to the major regional real estate markets, Hyderabad has performed well last year.

Residential market

Looking at the residential real estate market of Hyderabad, ANAROCK provides an overview in its Annual Report 2022. Registering the highest-ever residential launches and sales over the past decade, Hyderabad has witnessed an upward trajectory in the new residential supply by standing as a runner-up (with 19% of the Pan India new supply) next to MMR and surpassing the launches of the Silicon city - Bengaluru and rest of the top metropolitan cites. While the launches in 2022 saw a 1.3x growth in the new supply against 2021, the same grew by massive 3.9x against the year 2018. Accounting for 13% of the Pan India housing sales, a significant 1.8x growth is recorded on a yearly basis. H1 2022 showcased superior performance in terms of both launches and sales as compared to the second half of the year. Hyderabad's flourishing economy, rapidly expanding infrastructure by the government, upward trend in office space consumption, business-friendly policies by the Telangana government have been catalyzing the city's real estate market.

Residential units in the price range of Rs 80 lakh-1.5 crore accounted for 53% of the launches in 2022, followed by 27% in the mid-segment priced between Rs 40 lakh-80 lakh. The demand for larger ticket sized units remained evident from the rise in the share of high-end, luxury and ultra-luxury launches by 18%, 4% and 4% respectively, on yearly basis. The homebuyers' urge to upgrade their home and move into larger spaces post Covid-19 is likely to continue. Affordable and mid segment housing launches, on the other hand, saw a YoY drop by 7% and 19% respectively.

Among the top seven cities, Hyderabad was the front-runner to clock in the highest percentage growth in the value of home sales over the past three years. Nearly 455% rise is registered in the value of transacted residential units - from Rs 5,970 lakh crore in 2020 to Rs 33,100 lakh crore in 2022.

West Hyderabad - with a 55% housing sales share in the city - recorded the highest volume of residential transactions totaling to Rs 20,450 crore over the past three years. This momentum is likely to continue backed by major infrastructure development viz. proposed 31 km 'Airport Express Metro Corridor' of the Hyderabad Metro Rail phase-II that connects existing Raidurg metro station to Narsingi Junction.

Residential market 2023

A strong and positive momentum is expected to continue in Hyderabad residential market in terms of both new launches and sales in 2023. However, there are chances of an increase in the unsold inventory due to steady infusion of new residential units in the coming quarters. In terms of home sales, mid-end and high-end price segments are likely to continue to drive the housing demand. West Hyderabad replete with ITITeS establishments will continue to drive majority of home sales as well as new launches. Telangana government's GRID policy that emphasizes on encouraging development of new office spaces beyond the western parts towards eastern and northern fringes in order to facilitate geographically widespread development of Hyderabad through incentives will further boost the residential growth of North, East and South Hyderabad.

Commercial market

Hyderabad has seen a significant growth in commercial office space in the financial year 2023. The latest ANAROCK Research data indicates that Hyderabad outshone Bengaluru with the highest new office supply influx in FY 23. As much as 14.94 mn sq ft new office space was infused into Hyderabad in FY23, accounting for a 31% share of the total supply in the top seven cities. Office supply completions in the city were 27% higher than in FY 2022.

On the overall market scenario in office real estate, Prashant Thakur, Sr. Director & Head - Research, ANAROCK Group, says, “The robust growth seen in the office real estate market in the first half of FY 2023 was short-lived. The global slowdown in major economies of the world cast a shadow on the Indian office market in the second half. This trend is likely to continue in the near future. Major headwinds including layoffs by corporates and global recessionary trends will continue to mar office space growth in India.”

“Currently, the Indian economy is stronger than most developed nations, but the future bears watching,” says Thakur. “The currently depressed Indian office market may not improve till the first half of 2024. Many IT/ITeS companies have scaled down their business and are not looking to expand. Office markets across the top 7 cities will thus remain muted in the remaining months of 2023 and early 2024. We expect some stability from the second half of 2024, depending on how the global economy shapes up.”

Average Grade A office vacancy levels in the top seven cities witnessed a 0.1% Y-o-Y decline despite layoffs and restricted expansion of companies in the second half - from 16% in FY22 to a marginally better 15.9% in FY23. In terms of the average annual vacancy rates in these cities, Hyderabad alone saw a notable increase of 0.5%.

India's top seven office markets witnessed a 4% yearly increase in average office rentals. Hyderabad has seen a Y-o-Y gain of 7% in office rentals.

Outlook positive

According to the ANAROCK report, the average property prices is significantly lower compared to the other major cities across the country. This combined with the kind of industrial and infrastructure developments happening in and around the city, the real estate market of Hyderabad is expected to flourish in the coming years.

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