Affordable housing faces challenges amid soaring rates in Hyderabad

Realtors in the city pointed out that land rates, registration charges, construction materials, and labour costs have increased since the onset of the Covid-19 pandemic.

Real estate is getting dearer.

HYDERABAD: Developers across the city are finding it increasingly difficult to purchase land and build low-margin mass housing projects as land rates have soared. As a result, sales in the affordable housing category have been hampered. Surprisingly, over the course of one year, both the supply and sales of such houses have decreased by 50 per cent in Hyderabad.

According to Anarock Property Consultants, the number of affordable houses sold in the first half of the fiscal year (H1) 2022 was 1,460, but this figure dropped to 720 in H1 2023. Similarly, the new supply of affordable units saw a significant decline from 1,220 to 685 during the same period.

A mere three years ago, purchasing a flat or an independent house in Hyderabad was not an unattainable dream for middle-class buyers, with the cost of a 2 BHK property being less than Rs 50 lakh in most areas. However, within the city limits, a 2 BHK now costs around Rs 70 lakh to Rs 90 lakh. For salaried employees, it has become exceedingly difficult to afford a home at these prices. Moreover, a 3 BHK property in prime areas is now not available for less than Rs 1 crore.

Realtors in the city pointed out that land rates, registration charges, construction materials, and labour costs - all the components involved in building apartments - have increased since the onset of the Covid-19 pandemic. These factors have collectively contributed to the surge in flat rates across the State.

Prior to 2020, the cost per square foot for flats was around Rs 3,500 - Rs 4,000, depending on the locality. However, completing a project for anything less than Rs 6,000 per square foot has now become nearly impossible, developers lamented. They also emphasised that if construction costs were to decrease, flat prices could potentially see a drop.

Anarock’s research indicates that a significant portion of affordable housing buyers are postponing their purchase decisions due to the steep increase in real estate prices over the past year.This decrease in demand is also reflected in the new supply of affordable housing, as developers are now focusing on mid-range, premium, and luxury projects.

Anuj Puri, chairman of Anarock Group, said that the challenges faced by both buyers and developers in the affordable housing category extend beyond the impact of the pandemic.