Tall order: Hyderabad’s high-rises hit demand slump, buyers go for affordable options

Data shows that the number now high-rises slowed down significantly between 2022 and 2023, growing by only 9 percent.

Hyderabad’s unrestricted floor space index (FSI) policy, which has allowed the city’s skyline to grow taller without limits, is now revealing the downside of this freedom as demand for high-rises slows  due to higher prices. Also, oversupply is leading to lower resale value.

In real estate, FSI is a key concept that determines how much construction is allowed on a plot of land. It is calculated by dividing the total floor area of a building by the size of the plot. Between 2021 and 2023, the number of high-rise buildings in Hyderabad more than doubled, driven by the absence of FSI restrictions, allowing developers to build as much as they could on a plot of land.

According to real estate consultancy ANAROCK, the number of high-rise residential projects, defined as those with 15 floors or more, surged by nearly 60 percent in that period.

In 2021, Hyderabad saw the launch of 27 high-rises, encompassing 24,914 units. By 2023, this had ballooned to 67 projects, with approximately 57,187 units. In 2023, there were even 45 projects with more than 30 floors, encompassing 4,563 units, compared to five projects with 6,936 units in 2021.

Developers had been capitalising on the growing appetite for these towering structures, eager to meet demand and maximise profits.

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Oversupply slows demand

The tide has turned now. Increasingly, buyers are veering away from these skyscrapers due to their high entry prices—Rs 3-4 crore for premium apartments—and lower resale returns. Instead, many are opting for smaller, more affordable gated communities, leading to a slowdown in the high-rise segment.

New data shows that the rise in high-rises has decelerated sharply. Between 2022 and 2023, the increase was just 9 percent, with the first half of 2023 seeing only 26 new high-rise projects comprising 16,926 units, far below the 67 projects of the previous year.

Prashant Thakur, Regional Director & Head of Research at ANAROCK Group, indicated that this trend is unlikely to reverse in the short term. “While we still have half a year left, it looks unlikely that we will see the high-rise numbers of 2023 crossed,” he said.

Thakur also attributed the slowing demand to the resurgence of interest in plotted developments.

“More so, investment in land is a time-honoured tradition, but the last decade saw the exponential rise of the apartment culture across top cities. However, COVID-19 once again altered investment preferences. It has strengthened demand for land as a long-term investment, with plotted developments now trending across top cities like Bengaluru, Hyderabad, Chennai, etc.,” he explained.

Hyderabad, with ample availablity of land, has especially seen strong demand for such projects, which often offer a better appreciation rate, compared to neighbouring cities like Bengaluru.

Rising cost, higher prices

Real estate agents in Hyderabad confirm that the oversupply of high-rises has made homebuyers to look for other choices, further slowing the demand for new projects. Additionally, the cost of constructing these towering buildings has pushed apartment prices higher, making them less attractive to many buyers.

GV Jagdish, a senior realtor at Hanu Reddy Realty, explained that each additional floor adds to the cost of the apartment. “For every few floors of increase, the apartment cost increases by Rs 1,500-2,000 per sq ft, or about Rs 50 lakh,” he said. “This has pushed several homebuyers to choose standard gated societies at much more affordable rates over high-rises.”

In prime locations, such as Gachibowli and Hitech City, apartments in high-rises can cost as much as Rs 3-4 crore, according to Sunitha Reddy, senior manager at Remax Jubilee Properties. She added that these prices deter many buyers, especially when resale values remain low.

Jagdish also pointed out that while an apartment in a high-rise might sell for Rs 7,000 per sq ft, resale values can be significantly lower—sometimes as much as Rs 4,000 per sq ft. With current prices reaching Rs 14,000-15,000 per sq ft, the gap between purchase price and resale value remains a concern.

Unlike cities like Bengaluru, homebuyers in Hyderabad tend to prefer smaller, standalone gated communities, which offer lower maintenance costs and a sense of exclusivity. This preference has further slowed the uptake of high-rise apartments.

Infrastructure under strain

Meanwhile, the rapid development of high-rises is putting a strain on the city’s infrastructure. Although Hyderabad has traditionally been favoured for its manageable traffic and relative lack of congestion, compared to other metropolitan areas, residents are starting to notice the cracks. Traffic jams are becoming more common, especially in areas where clusters of high-rises are concentrated.

“I loved that, traffic was easy to navigate in Hyderabad,” said Thimmaya, who recently shifted from Bengaluru. “But the high-rise apartments being constructed next to each other without any thought to the capacity of the roads is starting to cause a lot of traffic chaos," he added.

Jagadish notes that certain pockets in Hyderabad today see as many as three high-rises in a 2-km radius with about 10,000 people living in the same cluster.

Architect Harsha Sridhar warns that Hyderabad’s vertical growth could lead to more significant infrastructure issues down the road. “Every city should have FSI to control the unregulated boom in real estate,” Sridhar said. “This vertical expansion puts more pressure on natural resources like water and energy. Without sustainable planning, Hyderabad could face the same flood and infrastructure issues that Bengaluru is struggling with.”

Sources maintained that while the state government has begun delaying approvals for major high-rise projects, no formal regulations have been implemented to curb the city’s vertical growth.