Residential property prices in Hyderabad surge

Residential property prices jumped significantly in the third quarter (Q3) of 2024. Price growth puts the city on top among the Indian cities that are growing rapidly; however, the city in itself still the highest price growth rate among the seven leading cities in the country.

Although six other major Indian cities also saw an upsurge in residential property prices during the period, Hyderabad emerged as a silver lining by witnessing the highest increase in prices during this period. According to the report of the leading real estate services company, ANAROCK, prices in Hyderabad had seen an increase of 4% just in Q2 2024 compared to Q3 2024. However, the more striking figure is the year-on-year change in property prices in the city. Property prices for residential in Hyderabad increased by a spectacular 32% year over year from Q3 of 2023 to Q3 of 2024, surpassing all top seven cities.

The Factors Influencing Houston Heights Rise in Property Values

Many factors have led to this sharp rise in the prices of properties in Hyderabad. One of the main reasons for this hike has been due to the increase in input costs. The raw materials and labor, among other expenses related to construction, have witnessed a hike; developers have started passing the buck on to the buyer in the form of increased property prices.

The demand for housing units here has also increased the price. House sales in the city remain erratic at times, but on the absolute level, sales in real estate have increased at a record level during the last few years, especially in the high-end and super-luxury segments. Economic growth, infrastructural development, setting up of IT companies and multinational corporations have turned the city into a perfect destination not only for homebuyers but also for investors.

Moreover, its property market experienced its upside because of the relatively lower prices compared with other major metropolitan cities like Mumbai, Delhi, and Bengaluru. More investors and homebuyers have been attracted to the city, considering it to be a lucrative investment opportunity. Strong demand along with increased construction costs led to a sharp surge in the property price.

Collective growth from the top seven cities in India was 23% year on year. This indicates that average price per square foot was INR 6,800 in Q3 of 2023 and reached INR 8,390 in Q3 of 2024, thus indicating the general growth of real estate prices in the nation. Hyderabad’s growth is double the national average at a whopping 32%. The contemporary real estate landscape has a strong example in Hyderabad in this regard.

Hyderabad’s Real Estate Market Compared with Other Cities

Hyderabad leads the way in terms of the percent increase in price, but it was not the only city in which the real estate market was on the rise. Its other major competitors, Bengaluru, Pune, Mumbai, and Chennai, also had increases in their residential property prices in this period, although none of them came anywhere near the year-over-year increase in Hyderabad.

All the cities have experienced price increases for more or less similar reasons, such as high input costs and consequently increased demand. For instance, Bengaluru is one such city where the demand for residential spaces in areas near IT hubs has increased. The property prices in Pune have also surged due to rising demand from young professionals and middle-income homebuyers desirous of having property.

Having been one of the world’s most expensive real estate places, Mumbai, India’s financial city, has become even pricier, with the price of properties in its suburb area escalating because of new constructions coming up, which are attracting home seekers who are looking for affordable housing options. Chennai is rapidly emerging as a great center for India’s industry and manufacturing sector, and property prices have been going up steadily.

Hyderabad stands out despite these rises. The real estate market of the city has beaten its peers consistently in terms of price growth over the last few years due to a robust economy, a good business environment, and efforts from the government in improving infrastructure.

Decline in Housing Sales

Curiously, property prices in Hyderabad and other top cities have risen, while sales of houses have fallen. So perhaps while on-paper demand remains as strong as ever, something-possibly affordability, interest-rate shifts, and sentiment changes-is surfacing elsewhere.

Among the seven cities, Kolkata witnessed the steepest fall in housing sales. As the numbers for Q3 of 2024 show, sales in Kolkata fell by 25% from Q3 of 2023. Such a sharp fall suggests that despite high price rises, demand for homes in the city has failed to follow, perhaps due to some economic issues or supply mismatches with buyer expectations.

Hyderabad, even though one of the top performers in terms of price, also posted an encouraging fall in housing sales. The ANAROCK report states that where the city had 16,375 units during Q3 of 2023, it settled at 12,735 in Q3 of 2024, thus recording a fall of about 22%. Some might be due to factors like more property prices pushing away some buyers and, in general, a diminution in housing sales in the country as a whole.

Balancing Supply and Demand in Hyderabad’s Realty Market

The slowdown in housing sales in Hyderabad sparks inevitable questioning about the sustainability of the current boom in real estate in this region. Rising prices are positive for owners and investors but trouble new homebuyers facing the prospect of being priced out of the market.

Affordability is turning out to be the growing challenge in the city of Hyderabad, as persons from middle-income groups and first-time homebuyers are finding it increasingly difficult to afford new homes. With the price increase, demand will slow down as the pool of buyers is restricted only to those who can afford new homes. Further, with a rise in interest rates and stricter lending conditions, there can be more potential buyers who will be denied home loans in order to facilitate their purchase, thereby dampening the sales.

Developers on the supply side are, therefore being squeezed between the increasing construction costs and the challenge to maintain prices competitive. The increase in input costs means the cost of building new homes translates directly to the price for the developers to pass to the buyer. This proves challenging as prices go up faster than the income which makes it almost impossible for many people to join the housing market.

Although there are certainly major challenges ahead, the long-term perspective for the Hyderabad real estate market remains promising. The sound economic fundamentals in the city will be complemented by the metro rail extension and construction of new roads and flyovers in the immediate future that will continue to fuel demand for housing in the city for years to come.

On the other hand, being a center for IT and pharmaceuticals, the presence of continuous entry of professionals into the city for residences near offices gives it a steady demand allied with the strategic aspect of Hyderabad and relatively cheaper living cost compared with the other metros.
On account of increasing input costs, and growing demand in this regard coupled with the economic significance of Hyderabad as an economic location, the present Hyderabad real estate market is witnessing very intense growth in the prices of house or residential properties. Though increase in the prices of house or residential properties has been a pleasing trend for investors and house owners, prospective buyers, especially those in the middle income category, do not relish it.

A fall in housing sales, not only in Hyderabad but also in other leading cities, tends to reflect an urgent call for balanced replenishment of supply vis-à-vis demand. Developers will have to keep rising costs in mind yet ensure affordability at the buyer end, while policies initiated by the government aiming at making it easy and encouraging homebuyers might play a significant role in extending this momentum for real estate.

Despite all these recent challenges, the long-term outlook for Hyderabad’s real estate sector appears bright as infra is going on in the city, and the city is the main economic hub, which should drive future demand for housing.