CBRE South Asia Pvt. Ltd report provides a detailed account of Hyderabad’s real estate growth journey, overview, trends, and outlook for the office and residential sectors in Hyderabad.
According to the report, in the next two to three years, Hyderabad is poised to witness an addition of approximately 35 - 38 mn. sq. ft. of high-quality business parks across its primary micro-markets. Fueled by a robust business environment cultivated over recent years, global corporations have entered Hyderabad, establishing outsourcing centers, back offices, research and development (R&D) facilities, and regional headquarters.
The escalating demand for office spaces has led to a substantial surge in supply since 2019, particularly along the city’s IT Corridor and Extended IT Corridor. Consequently, the city's investment-grade office stock surpassed 100 million square feet in 2022 and crossed 119 million square feet by the end of the Jul-Sep’23 quarter, a significant increase of 63% from 73 million sq. ft. stock in 2019. Hyderabad stood among the top 3 cities dominating office space leasing in Jan-Sep’23 at 6.6 mn. sq. ft., with 35% Y-o-Y increase. Key sectors that drove absorption included Life sciences, BFSI and technology.
A gradual return-to-office acceleration is expected to boost leasing momentum in the city, although concerns about global headwinds persist. With the necessary infrastructure in place, occupiers would continue to focus on IT Corridor for their office requirements. However, the rapidly increasing supply addition in Extended IT Corridor would provide more options and enable them to leverage comparatively low rentals.
The need to support hybrid and distributed working would continue to drive demand for flexible spaces across the key micro-markets. However, with increasing flexible space penetration in the city, prudent planning would be required to avoid an oversupply situation. ESG priorities are anticipated to influence leasing decisions for many global corporations significantly.
Flight-to-quality leasing is projected to persist in premium office assets featuring modern amenities, particularly in the IT Corridor and Extended IT Corridor. The sustained demand for flexible spaces is expected to lead major developers and investors to incorporate such spaces within their assets, either managed by flex operators or self-operated. To achieve optimal occupancies, engaging with occupiers during planning and design stages and aligning projects with sustainability and ESG requirements will be crucial.
Policies such as GRID (Growth in Dispersion) and government land allocations in city peripherals are anticipated to alleviate congestion in core micro-markets, driving real estate activity in North, South, and East Hyderabad in the medium to long term. Infrastructure initiatives, including SRDP, metro rail expansion, and the Regional Ring Road, are poised to enhance connectivity to the city's future growth nodes.
As per the report, the city is expected to experience the launch of more than 130,000 residential units within the next two to three years. The expansion of the technology sector and industrialization in Hyderabad has led to a predominant concentration of residential development in proximity to the key office micro-markets of IT Corridor and Extended IT Corridor in the western part of the city. The increasing demand from employees of multinational companies, coupled with the development of high-quality infrastructure, has not only stimulated the residential market but has also enhanced the overall quality of living in these areas.
This significant surge in housing projects signals a dynamic expansion in the real estate landscape, offering a substantial increase in housing options and potentially shaping the urban development of the city.
West Hyderabad is poised to maintain its status as the favored residential hub for home buyers, primarily serving the mid-segment, high-end, and premium categories. In contrast, North, East, and South Hyderabad's micro-markets are anticipated to attract mid-segment home buyers. Central Hyderabad is expected to sustain demand primarily in the high-end and premium segments. Buyers' preferences are likely to gravitate towards projects categorized under two budget brackets (INR 45 lakh – 1 crore and INR 1 – 1.5 crore), appealing to multiple first-time buyers and end-users entering the market. The real estate landscape may witness escalating budgets due to rising land and development costs coupled with larger unit sizes.
Developers are expected to continue launching new projects in key micro-markets, but a substantial increase in supply may impact delivery timelines and execution capabilities, leading to a rise in unsold inventory. Homebuyers, prioritizing affordability, now emphasize building quality, aesthetics, and surroundings post-pandemic, necessitating developers to incorporate new-age amenities, sustainable features, attractive designs, and well-planned outdoors in future projects. Emerging developers are advised to explore joint ventures or partnerships to mitigate risks related to funding, regulations, and development hurdles.
A long-term organic demand spillover from West Hyderabad to other city areas is anticipated, driven by ongoing industrialization and government-led development initiatives. The potential revocation of Government Order 111, if regularized with appropriate development controls, could further increase market supply. The city is poised for vertical growth with generous FSI norms, attracting homebuyers and investors in the coming years.
