Shekhar Reddy, 52, an employee in a multinational IT firm was looking to sell his three bed-room apartment in the upscale locality of Kokapet in Hyderabad. Six months later, he has postponed his plan after getting very few enquiries, that too at a substantially lower price.
Reddy isn’t alone. Property sales in the city have gone down by 38-43% in the last three quarters, the highest among the top nine cities, according to data analytics firm PropEquity. Even the inventory overhang, that is, months needed to clear the inventory is 20 months, which is the longest among all cities.
The city’s luxury property market, which is 20% of all property sales, has also been hit hard. Unsold inventory of properties priced at over Rs 2 crore rose 6% year-on-year to 30,320 units in the first quarter of 2025 – the highest in the country, according to Anarock Property Consultants.
The office market isn’t any better, reporting 59 million sq ft of new completions and 48.5 million sq ft of absorption since 2020. The trend of new completions surpassing absorption for five consecutive years has led to a significant rise in vacant office stock. As of Q1 2025, the city holds 28 million sq ft of vacant stock, the highest among the top seven cities. Despite robust demand, the stock is expected to rise further in 2025 on the back of a strong pipeline of upcoming supply in the city, said Vestian, a real estate solutions firm.
According to industry experts, there is a significant demand-supply mismatch in residential properties, leading to an overall slowdown. Between 2021 and 2023, around 70,000-90000 units hit the market from 20,000-30,000 units a year earlier. This led to significant oversupply. “That’s why sales have been falling,” said Sameer Jasuja, founder and chief executive at PropEquity.
Industry players said that post-pandemic, developers started building large residential apartments at high prices. For instance, Poulomi Estates launched its 55-storey Poulomi Palazzo in Kokapet, Hyderabad which is touted to be the tallest residential buildings in South India. Another building in Kokapet, SAS Crown, also claims to be the tallest in South India, with 57 floors and a height of 235 meters. According to the CEO of real estate investment firm, properties of 12,000 sq. ft. or 15,000 sq. ft. was unheard of in Hyderabad. So initially, there was some enthusiasm but then the demand tapered off.
Amit Bagri, chief executive officer at Kotak Mahindra Investments said that compared to Mumbai where 2,000 ft property is considered big, builders trying to sell 5,000 to 7,000 sq ft apartments in Hyderabad at Rs 5 to 7 crore won’t find many takers.
Since there is no cap on floor space index or FSI in Hyderabad, developers looking to build large complexes try to maximise their returns, experts said. “Developers can build any number of floors, but there is a clear demand and supply mismatch,” said an NBFC head who did not want to be named.
“Prices have gone up too high and too fast,” says the CEO of a real estate firm. For example, even in a large project, the price was Rs 5,000 per sq. ft. before the pandemic. Within the next year, it rose to 10,000 per sq. ft and further up to Rs 13,000 per sq.ft. in 2022. Now, it is back to Rs 9000 per sq ft, but there still aren’t many buyers.
In addition, the speculator /investor segment, which is around 30-35% has also led to challenges, experts said. Apart from NCR, Hyderabad is the only market which has high investor /speculator concentration. “Actual user demand is healthy but speculation leads to a lot of volatility in the market,” dealers said, adding even IT sector employees can’t afford these big ticket apartments and these are mostly bought by speculators.
Consequently, many private equity firms are expecting distress opportunities to emerge in Hyderabad market. “During the pandemic, we got our exits. We are sure there will be some distress opportunities. We are waiting for that,” said the head of a PE fund.
However, Vivek Rathi, Head of Research at Knight Frank India do not see concern as of now. “The build-up of luxury properties have happened in the past also in many cities. These are early days. If the situation continues like this, there will be an issue,” Rathi said.