Glut of office space in Hyderabad has builders worried

HYDERABAD: Amid fear of a global recession, Hyderabad’s property market is sitting on five times the current demand – its highest inventory ever. While the city has at least 25 to 30 million square feet (sft) of ready-to-occupy office space dotting its IT corridor, another 50 million sft is in the pipeline that is set to come up in the next three years.

Not an inch of it, however, has found any takers so far, market reports confirm.

Annual absorption in 2023 is expected to be nothing more than 6 million sft – about 50% less than 2019. “Given that businesses the world over are tightening their purse strings, Hyderabad might not be able to fill its existing office supply in the next four years,” said a senior real estate consultant, adding how Financial District alone has about 15 million sft of ready-to-occupy office space. “But not many corporates are willing to sign leases there. Along with a sharp drop in demand across cities, it is also the lack of social infrastructure that’s keeping them away,” the consultant added.

Industry representatives, are not pressing anxiety button just yet. “The real estate business goes through cycles. Post Covid there has been an issue of oversupply but that’s true of every city. Also, it is temporary. Once all offices open up and their staff returns, things will start looking up again,” said P Ramakrishna Rao, president, Credai-Hyderabad.

But the worry is inescapable given that residential overhang too is sizeable. While, on an average, Hyderabad sells between 28,000 and 30,000 units every year, now its supply is over 80,000.

“When the going was good pre-Covid, everybody jumped onto the office bandwagon hoping to net huge profits. Factors like exorbitant land rates and unlimited FSI led to developers building 4 to 6 lakh sqft per acre (it is not more than 1.2 to 1.5 lakh sft in other metros with FSI cap). This oversupply is a result of that overzealous attitude,” said a realtor.

“Top players might sail through. But mid and small-sized firms with large units of over 3,000 sft might find it tough to sell,” realtor added.