While the first and second waves of the pandemic saw many leaving big cities, including Hyderabad, the demand for rental units for residential purposes is seeing an upswing in demand with life returning to normalcy after the third wave of Covid-19.
Between 2020 and 2022, residential rentals dipped anywhere between 10 to 20 per cent across several micro markets in all cities including Hyderabad depending on the type of property and the facilities on offer, among other things. Vacancies in housing societies also rose significantly, even in those which remained full during the pre-pandemic period.
Due to the work-from-home and e-schooling, many people had migrated back to their hometowns, but as offices, including those in the IT/ITeS sectors, have started calling back their employees, albeit in a hybrid model, these individuals have returned to the city. Consequently, there has been a surge in demand, leading to an increase in rental prices.
According to Anarock Group, a real estate service firm, demand for residential rentals soared across cities, as did developers’ input costs, causing prices to rise, particularly in 2021 and 2022. Another factor driving prices up is the fact that most sales happening now are by branded developers who have not shied away from price hikes on the back of strong demand and rising construction costs.
Among the cities, the southern cities of Bengaluru and Hyderabad have seen a maximum five-yearly increase of 10 per cent in average property prices in the last five years. Average property prices in Bengaluru stood at Rs 4,894 per sq. ft. in 2018 and went up to Rs 5,570 per sq. ft. in 2022. As for Hyderabad, average prices in 2018 in the city stood at Rs 4,128 per sq. ft. and had risen to Rs 4,620 per sq. ft. in 2022.
Outlook for 2023
There is little reason to be pessimistic in the current year, though under-researched investments and a short-term profit perspective must be avoided in 2023, experts said. All the factors that drove up capital appreciation and rental yields are firmly in place, and the profitability potential for both investment rationales remains promising. That said, 2023 will face some headwinds in terms of economic slowdown and inflationary pressure, and this needs to be factored into any investment decision, including for real estate, experts added.
The year 2023 will continue to be driven by end-user demand, but serious long-term investors will find the market dynamics favourable, experts said. Property prices are likely to rise by another 5 to 8 per cent in the larger cities, they added.