The twin growth industries of IT and pharmaceuticals, coupled with low office rents are making real estate investment in Hyderabad an interesting option for investors.

The capital of Telangana province in southern India, with a metro area population of close to 10 million, which is predicted to grow 40% to beyond 14 million by 2035. This will be a factor in Oxford Economics’ prediction of 6-10% annual GDP growth for the next 5 years, growth which will power the Hyderabad real estate market.

Hyderabad is an important centre for pharmaceuticals, particularly the production of bulk pharmaceuticals. Almost 40% of India’s bulk pharmaceuticals production comes from the city.

More recently, Hyderabad has become a centre for IT and outsourcing, since the creation of the HITEC City special economic zone in 1998. HITEC City now forms part of one of Hyderabad’s major business districts, both in the west of the city. The IT-BPM sector accounted for nearly half the demand for office space in Hyderabad in the first quarter of this year, Savills data show.

“The city has seen a meteoric rise in recent years, with GDP growth well outpacing the average for India,” says Suryaneel Das, Assistant General Manager Research & Consulting, at Savills India. “This economic growth has been reflected in the growth of the real estate sector. Annual office space demand grew from 4 million sq ft in 2010 to 10 million sq ft in 2019.”

A key attraction for office occupiers is that rents in all of the city’s business districts are less than $1 per sq ft per month, making office space in Hyderabad considerably cheaper than in Bengaluru, Delhi-NCR, Mumbai or Chennai.

A citywide vacancy rate of 23.7% will keep rents competitive, especially with new supply forecast to be 13.8 million sq ft this year, adding to a total of 105.5 million sq ft of existing office stock.

In recent years, as in other major Indian cities, the flexible office space market has grown dramatically. The city witnessed 2.3 million sq. ft. of leasing activity from flexible spaces in the period 2020-22, which was around 15% of nationwide flexible workspace leasing in that period. In the first quarter of this year, flexible workspace accounted for 14% of Hyderabad’s office take-up.

The city continues to attract talent thanks to its liveability. According to the Mercer Quality of Living report 2019 (the latest available, due to the pandemic), Hyderabad was the best place to live in India.

In the future, the data centre sector is expected to be significant in Hyderabad. Microsoft recently signed a memorandum of understanding with the state government to build six data centres (each with 100 MW capacity) in phases over the coming 10-15 years.

Building on the city’s pharmaceutical expertise, the life sciences sector is expected to be more important in the future. The state government predicts life sciences revenues will grow three to four times to $40-50 billion by 2030. The city has upgraded its infrastructure in recent years, adding a metro system and an outer ring road. Other planned infrastructure developments include a new ring road and an elevated bus rapid transit system, which would provide elevated roads for electric buses.

Further reading:
Hyderabad Market Report

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Katy Dean