Hyderabad Real Estate Faces Cost Pressures

Hyderabad: In the wake of escalating real estate values and a surge in bank loan interest rates, numerous vacant housing units have emerged in various parts of the city. Following the pandemic, numerous developers in Hyderabad have constructed new residential properties in anticipation of future demand. However, potential buyers find it challenging to invest in 2BHK units priced at Rs 70 lakh or 3BHK units exceeding Rs 1 crore, which represent the average rates in many areas of Hyderabad. It has come to light that the city has an excess of 80,000 unsold residential units. Real estate experts attribute this mounting inventory to the escalating expenses of construction, registration fees, and land values. These factors have contributed to higher input costs for apartments and houses under construction, consequently burdening prospective buyers and impeding their ability to make purchases.

According to a report by CREDAI - Colliers - Liases Foras, the unsold inventory in Hyderabad has risen by 24 percent year-on-year, largely influenced by the surge in property launches in the southwest micro market. The report predicts that housing prices for newly-introduced projects will rise due to a steady escalation in land prices. The report further reveals that housing prices have seen a year-on-year increase of 13 percent overall, with Central Hyderabad experiencing the highest surge at 69 percent, driven by the launch of upscale projects. Among various unit types, the price of 4BHK units saw the most significant rise at 19 percent year-on-year, followed by 1BHK units at 16 percent year-on-year.

The average valuation of new and available properties in Hyderabad has recorded a 13 percent upward shift in prices, attributed to growing input costs, inflationary pressures, and premiums associated with ready-to-move-in inventory. The high costs have led to many constructed houses remaining unoccupied. Even in the city's outskirts, the cost of a 2BHK unit is no less than Rs 50 lakh.

With an amplified demand for spacious residences, developers continue to introduce upscale projects, resulting in an upward trajectory of housing prices for units under construction in markets like Kolkata, Hyderabad, and Bengaluru, as highlighted by the report.

"Over the past ten quarters, there has been a consistent upward trajectory in housing prices nationwide. While developers grapple with the challenges posed by higher construction expenses, the demand for housing remains resolute," noted Peush Jain, Managing Director of Occupier Services at Colliers India