Explained: With rising real estate prices, will Hyderabad's realty boom catch up with Bengaluru?

Experts said that since the bifurcation of Telangana and Andhra Pradesh, Hyderabad has slowly consolidated its position as one of India's top real estate hubs.

Residential prices have been rising significantly in Hyderabad in the last few years, amidst buoyant demand and increased new supply. Since 2023, the real estate sector in Hyderabad has been on a tear, with rentals increasing by at least 30 percent, local brokers say.

Analysts also point out that in certain micro-markets, Hyderabad has crossed Bengaluru in terms of property price appreciation.

For example, Hyderabad's Kokapet saw an 89 percent appreciation in property prices in the last five years. A study by real estate consultant ANAROCK says housing prices in Hyderabad recorded a 64 percent hike in prices between 2019 and H1 2024, followed by Bengaluru with a 57 percent increase.

After a major downcycle in the city's real estate sector, will Hyderabad's realty boom catch up with Bengaluru?

Affordable homes the key

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Much of the real estate demand in Hyderabad is driven by the IT sector, clustered across the western corridor -- around areas like HITECH City, Kundapur and Gachibowli. The south, closer to the airport, is slowly developing as well.

The eastern part of the city, with areas like Secunderabad and Ramoji Film City, predominantly see office spaces with affordable residential real estate. With major land banks available in the north, the area has a flourishing data centre and warehousing business.

"Hyderabad saw a major uptick in demand in apartments with ticket sizes of Rs 60 lakh and above. With affordable real estate still available in the city, it gives more scope to grow. Comparatively, Bengaluru's real estate has been in a bull run for the past three years and is now stabilising," Vivek Rathi, head of research, Knight Frank India, said.

Bengaluru housing sales dipped to 13,133 units in the first quarter of 2024, down 2 percent from the year-ago period, following a sharp drop in the affordable housing segment. After a major jump in apartment rentals in the first two quarters of 2024, the apartment rental growth in Bengaluru has slowed down by at least 5-10 percent, according to local brokers.

"This has led to a rise in demand for apartments in Hyderabad in the range of 1,000-2,000 sq ft by 40 percent last year. Hyderabad's real estate story will continue to grow over the next 2-3 years, owing to the mismatch in supply and demand while Bengaluru seems to be saturating due to the higher inventory supply available today," Ritesh Mehta, Senior Director and Head (North and West), residential services and developer initiative, JLL India, added.

Recent political changes

Experts say that since the bifurcation of Telangana and Andhra Pradesh, Hyderabad has slowly consolidated its position as one of India's top real estate hubs. The city has seen significant real estate growth, with property values appreciating by 45 percent between 2021 and 2024.

In June 2024, Chief Minister Chandrababu Naidu announced that Amaravati would be the sole capital of Andhra Pradesh.

"This has brought a lot of clarity, especially for investors. More than 60 percent of the city's budget is being spent on infrastructure and public amenities, driving prices further," Mehta said.

Commercial activity and economic growth 

While Bengaluru continues to dominate commercial activity across the country, Hyderabad has started seeing renewed office activity in the last 2-3 years.

After the recent political changes, Hyderabad is seeing a lot of interest from corporates in sectors like BFSI, IT and pharma, Rathi added.

Today, Hyderabad is contributing about 30 percent to India's total share in terms of supply for the commercial sector and 24-25 percent share in terms of demand, data from JLL indicate.

On the other hand, the office space absorption in Bengaluru has only marginally grown in terms of volume over the last year, indicating a slowdown, Rathi said. "Commercial activity plays a huge role in churning the city's real estate sector, and can be a driving factor behind residential price appreciation," he added.

However, analysts say that while Hyderabad's real estate sector is growing today, Bengaluru will continue to dominate in terms of overall supply and absorption. "While Hyderabad is catching up with Bengaluru in terms of growth, it is highly unlikely that the former can take over," Priyanka Kapoor, Senior Vice President - Research, ANAROCK Group, said.