Hyderabad's real estate landscape has seen a remarkable transformation, as highlighted in a recent report by Knight Frank India titled "India Real Estate – Office and Residential Market – Jul-Sep – 2023." This transformation has been unfolding since 2018 and marks a significant shift away from affordable housing, which used to be a cornerstone of Hyderabad's real estate market.
During Q3 2023 (July to September), Hyderabad experienced a substantial decline in affordable home sales. Among India's major cities, Hyderabad had the lowest sales in the sub-5 million segment, with a staggering year-on-year sales drop of 44 percent. While Hyderabad's overall real estate market grew by 5 percent, a substantial 52 percent of sales now fall 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.
According to Knight Frank, the impact of price hikes and interest rate increases has been profound, resulting in a 7 percent increase in down payments and a significant 14 percent rise in effective EMI (Equated Monthly Installments). This has made it increasingly challenging for middle-class individuals to realize their dreams of homeownership.
Q3 2023 statistics reveal that 52 percent of residential sales in Hyderabad now fall into the ticket size of 10 million and above, leaving only 9 percent for homes below the 5 million mark.
Shishir Baijal, the Chairman and Managing Director of Knight Frank India, remarked on this shift, saying, "Residential sales are on the upswing, reaching multi-year peaks. Despite a noticeable increase in inventory levels as developers respond to this robust demand, the market's overall health is improving, with robust sales momentum. Higher interest rates and prices have had minimal effects on buyers investing in higher-priced properties. However, the affordable housing sector has been significantly impacted, calling for additional measures to stimulate demand and bolster development feasibility."
He added, "While we recognize the expansion in the overall residential market, concerns are emerging, particularly within the affordable housing sector, which has witnessed a sustained downturn in Q3 2023." Recent economic turbulence has impacted lower-income consumers, affecting areas like rural spending and the lower end of the passenger vehicle market. The decline in the affordable housing segment is concerning as it has historically been the largest buyer segment, playing a pivotal role in the long-term growth of the real estate industry. A prolonged slowdown could have adverse effects on the real estate sector in the long run. Consequently, stakeholders must reassess their strategies to reinvigorate the affordable housing segment and sustain its momentum."
In the midst of these transformations, Hyderabad has garnered attention for its remarkable progress in the commercial real estate arena. The city achieved national prominence by achieving the highest number of new office completions, totaling 2.9 million square feet of office space transactions in 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 percent of the total office space area in Q3 2023, while flex office spaces constituted 13 percent of the total volume transacted.
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