The city has witnessed a sharp drop in affordable home sales during the third quarter of 2023, spanning from July to September
Updated – October 4, 2023, 02:24 PM
HyderabadAccording to a recent report by Knight Frank India, Hyderabad’s real estate scenario has undergone a significant change. The latest report titled “India Real Estate – Office and Residential Market – July-September – 2023” reveals the trends that have been evolving since 2018. Affordable housing, the strong cornerstone of Hyderabad’s real estate, has now reached its lowest point.
The city has witnessed a massive drop in affordable home sales during the third quarter of 2023, spanning from July to September. Among seven other major cities in India, Hyderabad recorded the lowest sales in the under Rs 5 million segment, with sales declining by a massive 44 per cent year-on-year.
Hyderabad’s overall real estate market has grown by 5 per cent, but a significant portion of its sales, i.e. 52 per cent, now fall in the premium category. This shift towards premium properties has resulted in prices rising by 11 per cent year-on-year, taking the average price per sq ft to Rs 5,518.
According to Knight Frank, the impact of price hikes and rising interest rates has been profound, leading to a 7 per cent increase in down payments and a staggering 14 per cent rise in effective EMIs. This is making it increasingly challenging for middle-class people to realise their home dream.
Data for Q3 2023 shows that 52 per cent of residential sales in Hyderabad are now in the ticket size of Rs 10 million and above, while only 9 per cent of homes are available for less than Rs 5 million.
Commenting on this change, Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “Residential sales are steadily picking up, reaching multi-year highs. While inventory levels have seen a significant increase as developers launch projects to meet this strong demand, the overall market health is improving with strong sales velocity. Higher interest rates and prices have had little impact on high-ticket-size homebuyers, but the affordable segment has been severely impacted, necessitating further interventions to stimulate demand and enhance development viability.”
He added, “While we are celebrating the growth of the overall residential market, concerns are arising, especially in the affordable segment, which has seen a consistent decline in Q3 2023. The economic turmoil in recent quarters has impacted low-income consumers, impacting segments such as rural consumption and the lower end of passenger vehicle sales. This decline in the affordable housing segment is worrisome as it has been the largest buying segment, which is critical for long-term industry growth. A prolonged slowdown could hurt the real estate sector in the long run. Hence, stakeholders should reconsider strategies to revive the affordable segment and maintain its momentum.”
Amid these changes, Hyderabad also made headlines for its impressive progress in the commercial real estate sector. The city recorded the highest number of new office constructions in the country, with 2.9 million sq ft of office space transacted during the third quarter of 2023.
The average transaction rent in Hyderabad remained stable at Rs 65.3 per sq ft per month during the quarter. Global Capabilities Centres accounted for 75 per cent of the total office space area transacted in Q3 2023, while flex office space accounted for 13 per cent of the total transaction volume.
Ticket-size breakdown of sales in Hyderabad 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%
– Overall sales growth: 5%
Source: Knight Frank India