Hyderabad sees surge in premium real estate as affordable housing market shrinks

The city has seen a sharp decline in the sales of affordable homes during Q3 2023, spanning from July to September

Hyderabad: Hyderabad’s real estate landscape has undergone a significant transformation, according to a recent report by Knight Frank India. The latest report, titled “India Real Estate – Office and Residential Market – Jul-Sep – 2023,” reveals a trend that has been developing since 2018. What was once the sturdy cornerstone of Hyderabad’s real estate, affordable housing, has now descended to its lowest point.

The city has seen a sharp decline in the sales of affordable homes during Q3 2023, spanning from July to September. Among seven other major cities in India, Hyderabad recorded the least sales in the sub-5 million segment, with a staggering YoY sales drop of 44 per cent.

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While Hyderabad’s overall real estate market has grown by 5 per cent, a significant portion of its sales, precisely 52 per cent, now falls in the premium category. This shift towards premium properties has resulted in 11 per cent YoY increase in price levels, with an average price per square foot reaching Rs 5,518.

According to Knight Frank, the impact of price hikes and interest rate increases has been profound, leading to a 7 per cent increase in down payment and a staggering 14 per cent rise in effective EMI. This has made it increasingly challenging for middle-class individuals to achieve their homeownership dreams.

Q3 2023 statistics reveal that 52 per cent of residential sales in Hyderabad are now in the ticket size of 10 million and above, leaving only 9 per cent for homes below the 5 million mark.

Shishir Baijal, Chairman and Managing Director of Knight Frank India, commented on this transformation, saying, “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.”

He 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.”

Amidst these changes, Hyderabad has also made headlines for its impressive strides in the commercial real estate sector. The city recorded the highest new office completions in the country, with 2.9 million square feet of office space transactions during Q3 2023.

The average transacted rent in Hyderabad remained stable at Rs 65.3 per square foot per month during the quarter. Global Capabilities Centers transacted 75 per cent of the total office space area in Q3 2023, while flex office spaces constituted 13 per cent 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 millionand above: 34%
– Total Sales Growth: 5%

Source: Knight Frank India