Image Source: Knight Frank India
Hyderabad, known for its vibrant real estate market, has recently undergone a drastic transformation, as reported by Knight Frank India. The latest report, titled "India Real Estate - Office and Residential Market - Jul-Sep - 2023," sheds light on a concerning trend that has been developing since 2018. While affordable housing was once the backbone of Hyderabad's real estate, it has now reached its lowest point.
A Decline in Affordable Housing Sales
During Q3 2023 (July to September), Hyderabad experienced a sharp decline in the sales of affordable homes. Among the seven major cities in India, Hyderabad recorded the least number of sales in the sub-5 million segment, with a staggering year-on-year sales drop of 44%. The city's overall real estate market grew by 5%, but a significant portion of the sales, precisely 52%, now falls under the premium category.
Average price per square foot: Rs 5,518
The Rise of Premium Properties
The shift towards premium properties in Hyderabad has led to an 11% year-on-year increase in price levels, with an average price per square foot reaching Rs 5,518. This increase can be attributed to the impact of price hikes and interest rate increases, which have made it increasingly challenging for middle-class individuals to fulfill their homeownership dreams. The down payment has increased by 7%, and the effective Equated Monthly Installment (EMI) has seen a staggering 14% rise.
Alarming Statistics
The statistics from Q3 2023 paint a concerning picture of Hyderabad's real estate market. Currently, 52% of residential sales in the city fall under the ticket size of 10 million and above, leaving only 9% for homes below the 5 million mark.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, reflects 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."
He adds, "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 has 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."
Hyderabad's impressive strides in the commercial real estate sector
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 accounted for 75% of the total office space area transacted, while flex office spaces constituted 13% 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 real estate market continues to witness a surge in premium properties and a decline in affordable housing, it becomes crucial for stakeholders to address this concerning trend. Reviving the affordable segment and maintaining its momentum will be essential for long-term industry growth. With the city's impressive strides in the commercial real estate sector, there is potential for further development and innovation in Hyderabad's real estate landscape.
