The real estate landscape in Hyderabad has taken a dramatic turn, with a recent report by Knight Frank India revealing a significant shift in the market. The report, titled "India Real Estate - Office and Residential Market - Jul-Sep - 2023," highlights a trend that has been evolving since 2018. Affordable housing, which was once a robust cornerstone of Hyderabad's real estate, has now reached its lowest point.
During Q3 2023, spanning from July to September, Hyderabad experienced a sharp decline in the sales of affordable homes. Among seven major cities in India, Hyderabad recorded the lowest sales in the sub-5 million segment, with a staggering year-on-year sales drop of 44 percent.
However, while the sales of affordable homes have plummeted, Hyderabad's overall real estate market has grown by 5 percent. A significant portion of the sales, precisely 52 percent, now falls into the premium category. This shift towards premium properties has led to an 11 percent year-on-year increase in price levels, with an average price per square foot reaching Rs 5,518.
The impact of price hikes and interest rate increases has been profound, according to Knight Frank. There has been a 7 percent increase in down payment and a staggering 14 percent rise in effective EMI. Consequently, middle-class individuals are finding it increasingly challenging to achieve their homeownership dreams.
The statistics for Q3 2023 reveal that 52 percent of residential sales in Hyderabad are now in the ticket size of 10 million and above, leaving only 9 percent for homes below the 5 million mark.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, commented on this transformation, stating, "Residential sales continue to gain momentum, reaching multi-year highs. Although inventory levels have seen a significant rise due to developers launching projects to cater to this robust demand, the overall market health is improving, with strong sales velocity. Elevated interest rates and prices have had little impact on higher-ticket-size homebuyers, but the affordable segment has been severely affected, necessitating further interventions to stimulate demand and enhance development viability."
Baijal further added, "While we celebrate overall residential market growth, concerns arise, notably in the affordable segment, which has seen a steady decline in Q3 2023. Economic turbulence in recent quarters hit lower-income consumers, affecting segments like rural consumption and the lower end of passenger vehicle sales. This decline in the affordable housing segment is worrisome because it’s been the largest buying segment, crucial for long-term industry growth. Prolonged slowdown could harm the real estate sector in the long-term. Therefore, stakeholders must reconsider strategies to revive the affordable segment and maintain its momentum."
Additionally, amidst these changes, Hyderabad has made headlines for its impressive strides in the commercial real estate sector. The city witnessed the highest new office completions in the country during Q3 2023, with 2.9 million square feet of office space transactions.
The average transacted rent in Hyderabad remained stable at Rs 65.3 per square foot per month during the quarter. Global Capabilities Centers accounted for 75 percent of the total office space area transacted, while flex office spaces constituted 13 percent of the total volume transacted.
Ticket-Size Split of Sales in Hyderabad's Real Estate Market (Q3 2023):
- <$5 million: 749 units
- $5-10 million: 3,247 units
- $10 million and above: 4,329 units
- Total: 8,325 units
Year-on-Year Percentage Change:
- <$5 million: -44%
- $5-10 million: -2%
- $10 million and above: 34%
- Total Sales Growth: 5%
Source: Knight Frank India
As Hyderabad's affordable housing market shrinks, the surge in premium real estate presents new challenges and opportunities. Stakeholders must find innovative strategies to revive the affordable segment while maintaining the momentum of the overall market. Despite the decline, Hyderabad's commercial real estate sector continues to thrive, solidifying the city's position as a significant player in the industry.