Hyderabad was best performing residential market in 2021 despite pandemic

Hyderabad: Hyderabad was the best performing residential market in 2021 with sales growing by a resounding 142% year-over-year (YoY) to 24,312 units in 2021, the highest in recorded history since 2011, according to Knight and Frank India Real Estate Residential and Office Market 2021.

Even in half-yearly terms, sales in the second half (H2) of 2021 grew by 135% YoY. According to the report, while low-interest rates, higher savings rates, and high affordability were primarily driving the market, also at play was the fact that Hyderabad's homebuyer base is composed of a substantial Information Technology (IT) workforce which has been largely unaffected by the pandemic-influenced disruptions.

"In fact, the pandemic has actually reignited residential demand by curtailing personal mobility and space for the better part of the past two years, motivating the masses to look for more spacious and comfortable residential accommodation," said the report.

Developers were quick to capitalize on this shift in sentiment by launching 19,024 units in H2 2021 which translated into a growth of 126% YoY. Sixty-four per cent of these units were launched in west Hyderabad with Cybercity Builders & Developers, Shanta Shriram Constructions and SNR Constructions featuring prominently among developers active in west Hyderabad. Locations such as Kokapet, Peerancheru, Gopanapalle, and Nalagandla saw most of the development activity.

West Hyderabad also accounted for a similarly high 60% of the total sales during H2 2021 with homebuyers preferring to be close to the office hubs of HITEC City, Gachibowli, and Nanakramguda in the commercial core of the city.

The mid-segment of Rs. 5-10 million has always constituted the bulk of sales and accounted for 48% in H2 2021 as well. Up from 46% in H2 2020, this segment's share has remained in the range of 46% to 52% since H1 2018. The shares in both Rs. 10 million segments' shares had fallen marginally in H2 2020.

The report also said that Hyderabad is the only market among the eight big cities that has not seen a single year of price decline since the first half (H1) of 2013. The fact that it was also the only market that saw no YoY change in price levels at the end of 2020 despite the pandemic-induced disruptions depicts the underlying strength of its residential market. While no longer among the cheapest markets in the country, it remains an attractive destination for the end-user and as seen more recently, for investors as well. Residential prices increased by 5% YoY in H2 2021.

Residential demand is firmly entrenched in the ready-to-move-in properties and has caused the average age of inventory in Hyderabad to reduce from 11.5 quarters in H2 2020 to 7.6 quarters in H2 2021. Recent trends suggest an increase in demand for under-construction properties of established developers as well. While worries on overbuilding and consequent overburdening the infrastructure exist due to the relaxation in FSI restrictions, sentiments in the residential market remain buoyant for the near to medium term.