Shekhar Reddy, 52, a worker in a multinational IT company, had wanted to offload his three-bedroom apartment in the high-end neighborhood of Kokapet in Hyderabad. Six months after that, he has put off his intention after receiving hardly any enquiries, that too at a much lower rate.
Reddy is not alone. Sales of properties in the city have declined by 38-43% over the last three quarters, the highest among the top nine cities, as per data analytics company PropEquity. Even the inventory overhang, i.e., months required to sell the inventory, is 20 months, the longest among all cities.
The luxury residential real estate market in the city, which accounts for 20% of total property sales, has also taken a severe beating. The unsold inventory of properties valued above Rs 2 crore rose to 30,320 units in Q1 2025. This marks a 6% year-on-year increase, as per Anarock Property Consultants, highlighting a significant trend in the nation's luxury property market.
The office market is no different, with 59 million sq ft of new completions and 48.5 million sq ft of absorption from 2020 onwards. Five years in a row, the pattern of new completions being higher than absorption has created a huge hike in vacant office stock.
Standalone, as of Q1 2025, the city is sitting with 28 million sq ft of vacant stock, the highest for the top seven cities. In spite of strong demand, the stock is likely to appreciate further in 2025 on the strength of a solid pipeline of future supply in the city. Vestian, a real estate solutions company, stated.
The residential property sector is facing a huge demand-supply mismatch, resulting in falling sales. Between 2021 and 2023, 70,000-90,000 units came into the market, whereas a year ago it was 20,000-30,000.
Developers like Poulomi Estates and SAS Crown have constructed big residential apartments at high prices, resulting in a shortage. There was initially a craze for properties of 12,000 sq. ft. or 15,000 sq. ft., but later demand reduced.
Kotak Mahindra Investments CEO Amit Bagri anticipates that Hyderabad developers selling apartments of 5,000 to 7,000 sq ft for Rs 5 to 7 crore will find it tough to sell out against the 2,000 sq ft properties in Mumbai.
Hyderabad's FSI is unlimited, permitting developers to reap the maximum yield. But there is a disconnect between demand and supply, and developers are trying to construct big complexes in order to reap the maximum yield.
The construction pace has gone up at a fast rate, with prices hitting Rs 13,000 per sq ft in 2022 and then falling down to Rs 9000 per sq ft. In spite of these obstacles, most buyers cannot afford to buy the apartments in Hyderabad.
Experts warn that the high concentration of investor/speculator segments in Hyderabad, a market with a 30-35% concentration, has caused market volatility. Private equity firms are anticipating distress opportunities in the market, while Knight Frank India's Director of Research, Vivek Rathi, does not see concern. The accumulation of luxury residential properties in the city is still early.
The Hyderabad property market is caught in a downturn with sharp declines in sales and rises in unsold luxury and office stock. Large, high-value apartment oversupply and steep price rises have scared off buyers, causing the market to correct itself despite continued development.