February 2023

S P OT L I G H T
Savills Research Hyderabad: The Sprint
 PREFACE

History and museums, a

cultural melting pot, a quaint
education centre, a lot of cricket
with a smattering of other
sports, the hugely popular
‘Tollywood’ and a profusion of
mixed commerce conjure up the
classic Hyderabad imagery of
the mid-1990s. The old charm of
‘Charminar’ juxtaposed with
post-independence
industrialisation in an evenly
balanced mix.
It was at this juncture that the
city began its enchanting rise. A
rise so quick that it is hard to
find a comparable. In less than
two decades, it transformed into
one of the largest technology
centres, a major life sciences
industry hub, attracted major
business pursuits from all over
the world, had a privately owned
greenfield airport that today
ranks among the top few
globally1, and much more.
It has sprinted with the energy
burst of a short-distance
champion.

1. https://www.airhelp.com/en-in/airhelp-score/airport-ranking/

savills.in 2
 Hyderabad: The Sprint

A HIGH GROWTH TRAJECTORY

The city has been through a period of high sectors - IT-BPM and Pharmaceuticals. In 2021, country comes from Hyderabad2.
economic growth, when compared with major the IT sector contributed around 14% of the This economic acceleration has created
urban centres of the country, especially towards city’s GDP. The success story of Hyderabad is opportunities for the growth of several enabling
the end of the last decade (refer Fig 1). also reflected in its prominent position as the industries including infrastructure and real
pharmaceutical and vaccine hub of the country.
The growth is primarily driven by two key estate.
Almost 40% of the bulk drug production in the

Fig 1:Hyderabad GDP vis-à-vis Indian & APAC Cities Fig 2: Economic Activity Driven
by IT-BPM Sector
GDP, 2016-26 Hyderabad India AsiaPac cities
2021=100

160

150

140

130

14%
120

110

100
Share of Information &
90 Communication Sector in City
GDP (2021)
80

70

60

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Source: Oxford Economics, Oct 2022 Source: Oxford Economics, Oct 2022

2. Oxford Economics
 Hyderabad: The Sprint

SYNCHRONOUS GROWTH OF
REAL ESTATE

As economic growth was shaping up

in the last decade, the real estate
Fig 3: Evolution of Hyderabad Real Estate Hotspots
sector took a quantum leap. The
city’s real estate hotspots swiftly
moved from the old city to western Prior to
precincts, i.e., HITEC City, 2000s
2000s-Mid 2010s:
Gachibowli and Nanakramguda, etc.,
fueled by the steady rise of the 01 Prominence of IT
Industry
IT-BPM industry. From the mid-
2010s, Shamshabad and adjoining
areas in the south witnessed traction 02
as the newly developed Rajiv Gandhi CBD Areas West Hyderabad
International Airport began its Begumpet Gachibowli
operations. Ameerpet HITEC City
Jubilee Hills Financial District
As a key measure, there is hardly
another city that has witnessed an 2015 onwards:
office space demand growth from International airport
around 4 mn sq. ft. in 2010 to almost & metro impact
10 mn sq. ft. in 2019 and occupied a
top-3 slot in such a small timeframe.
03 Future Areas:
Except for 2022, Hyderabad has been
South Hyderabad As previous hotspots
among the top 3 positions in terms of
Shamshabad saturate
leasing activity. Its growth has
remained intact even as it slowed Adibatla
temporarily in 2022; the city 04
registered a 2% increase in leasing
activity as compared to 2021.
Residential real estate has also been
strong, with the city registering the
highest housing sales in 2022 in the Northern & Eastern
last 10 years. Hyderabad is the only Peripherals (Uppal)
city in India to have witnessed
constant appreciation in capital
Source: Savills India Research
values throughout the last decade.
In the retail segment too, annual
supply addition increased for the
first time since 2018, as 2022 Fig 4: Hyderabad Office Leasing Activity Trend
witnessed around 1 mn sq. ft. of
supply infusion. As of Dec 2022, 60
Hyderabad had around 8% share in 14 11 12 11 15 14 13 17 17 15 11
the operational mall stock of India. 50
Data centres, the sunrise sub-sector 4 6 4 6 4 4 4 3 2 3 6
within real estate, have emerged as a 40
favourite asset class for investors. Of
mn sq.ft.

the 500 acres of data centre related

land transactions in 2022 in the 30
country, around 26% came from
Hyderabad. 20
While real estate performance
provides evidence of economic 10
resilience, they point to the factors
or forces that laid the foundation for
the economic strength. We discuss 0
these forces briefly. 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

India Gross Absorption Hyderabad Gross Absorption Hyderabad Market Share (%) Hyderabad Rank in India

Source: Savills India Research

savills.in 4
 Hyderabad: The Sprint

FOUR FACTOR
FOUNDATION

The economic and real estate success story of Hyderabad has been highly based
on four key factors, which are in a way correlated.
Policy push | Infrastructure upgrade | Affordability | Human capital

Fig 5: Forces Behind Hyderabad’s Vantage Point

GOVT. FACTORS
Needs to be sustained
Policy Infrastructure in the future as well

INHERENT FACTORS
Human Competitive edge in
Affordability certain parameters might
Capital be impacted in future

Source: Savills India Research

Policy Push
Proactive government policies have powered the growth story of Hyderabad.
Investor-friendly policies such as the Information Communication Technology
(ICT) Policy 2.0 have contributed significantly to the expansion of MNCs in
Hyderabad. The new IT policy focusses on digital empowerment of citizens,
innovation, and entrepreneurship. It includes a Start-up Telangana portal which
aims to be a one-stop destination for the entire start-up ecosystem of the state.
Other key policy level initiatives in recent times include Telangana Electric
Vehicle (EV) and Energy Storage Solution (ESS) Policy, Space-Tech framework,
statewide optical fibre network and Growth in Dispersion (GRID) policy. The
GRID policy has incentivised IT companies to embrace the proposed IT parks in
northern and southern peripheral areas. Similarly, TS-ipass, a single window
portal for obtaining required permissions within stipulated timelines is a
forward-looking initiative.

Infrastructure

The real estate growth story in Hyderabad has not fructified suddenly; it has been
in the making for a major portion of the last two decades and continues to evolve.
Steady infrastructure creation and upgrades, including the Nehru Outer Ring
Road (ORR), expansion of metro rail and the implementation of a Strategic Road
Development Plan (SRDP), have ensured excellent connectivity in and around the
city, thereby enhancing core real estate potential. Other planned infrastructure
developments include the Regional Ring Road (RRR) and Elevated Bus Rapid
Transport System (EBRTS).

5
 Hyderabad: The Sprint

Affordability Fig 6: Average Office Rentals Across Indian Cities (2022)

Relatively affordable price points have defined ‘The Hyderabad City CBD Areas SBD Areas PBD Areas
Opportunity’ to a large extent. This is particularly pronounced in
the commercial office market, wherein practically the entire city Hyderabad
enjoys a cost advantage (refer Fig 6).
In an environment of hybrid work and increased adoption of the Bengaluru
Hub & Spoke model, Hyderabad stands to benefit most from
sub-dollar office rentals over a long period of time. No wonder Chennai
therefore that it is a major market for flexible spaces. The city
witnessed 2.3 mn sq. ft. of leasing activity from flexible spaces in Delhi-NCR
the period 2020-22, which is around 15% of the shared space
demand in the country. Mumbai
Similarly, residential capital values and rentals for the secondary
business districts or sub-urban areas of Hyderabad are 10-20% Pune
lower, compared to similar localities in other major cities in
southern India. Moreover, infrastructure upgrade across the Well Below 1 USD/Month Around 1 USD/Month Well Above 1 USD/Month
city continues to help the momentum in peripheral areas such as
Miyapur, Tellapur, Shamshabad and Medchal. Source: Savills India Research

Human Capital

The city’s economy has been vitalised by excellent availability of skilled Global consulting firm Mercer’s Quality of Living Ranking 2019 named
talent. In FY22, almost 1.5 lakhs employment opportunities were realised Hyderabad as the most livable city in the country for the fifth consecutive
in the IT/ITeS sector which in turn translated to one-third of the IT year. Hyderabad’s progress on the sustainability front also plays a role in
related jobs in the country. In fact, by the end of FY22, IT/ ITeS employed creating an admirable human capital base; the city recently won the
around 7.8 lakh people in the state (primarily Hyderabad); this is a 24% ‘World Green City 2022’ award 4 .
YoY increase compared to FY213. People are particularly drawn in by the
quality of life the city offers to working professionals and students alike.

3. Telangana IT, Electronics and Communication Dept.

4. Times of India

savills.in 6
 Hyderabad: The Sprint

THE FIFTH FORCE BUILD-UP

Government support in the form of forward-looking policy initiatives and continuous infrastructure upgrade is paramount if the growth story of the
city is to be taken ahead in the years to come.
We believe that the next phase of economic as well as real estate prosperity is strongly linked to the following:
1) A
 Transit Oriented Development (TOD) Approach | 2) Sharp focus sectors such as Life Sciences, Data Centres, EV Ecosystem, AVGC and
Aerospace

Fig 7: Sectoral Focus: The Fifth Force

Life Sciences, Data Centres,

EV Ecosystem, AVGC,
Infrastructure Sectoral Aerospace
Policy (TOD Centric) Focus

Affordability Human
Capital
GOVT. INHERENT
FACTORS FACTORS

Source: Savills India Research

TOD Model Life Sciences Data Centres

Transit Oriented Development (TOD) is one of With respect to the life sciences sector, the Apart from the existing subsidies in power
the approaches adopted globally to address the state already has a long-term vision in place. tariffs for data centres, a smooth land
challenges of urban sprawl by concentrating the Developing a world class life science city in acquisition process is critical for the
activities at a node or along a public transit the peripheral areas of Hyderabad will development of the data centre ecosystem.
corridor, thereby increasing the efficiency of provide a significant boost to existing Microsoft has recently signed a MoU with the
land utilisation. Areas in proximity to the clusters like Genome Valley and Med Tech state government to build six data centres
airport in South Hyderabad can benefit the Park. A PPP model can be encouraged to tap (each 100 MW capacity) in a phase-wise
most from such a model. Last mile connectivity in rising investor interest in the sector. manner for the next 10-15 years6. Ancillary
should be a focus area. Also, economic centres Viability gap funding for start-ups to reach support system should also be encouraged in
and housing should be promoted within the commercialisation stage and technology the form of government sponsored skilling
clusters such that either the need to commute is sharing between academia and industry and internship programmes. Such measures
reduced or a public transit mode is readily should also be promoted for realising the are likely to result in significant real estate
available for residents. complete potential of the promising sector. demand from data centres in the future. It is
It is anticipated that revenues from the life expected that by 2025, Hyderabad will have a
sciences sector in the state will be 3-4 times 7-10% share (~2.5 mn sq. ft.) in India’s data
the current levels and reach USD 40-50 centre stock.
billion by 20305.

5. invest.telangana.gov.in
6. Economic Times

7
 Hyderabad: The Sprint

EV Ecosystem AVGC Aerospace

Adequate charging infrastructure creation For promotion and growth of the SEZs or enterprise hubs dedicated to the
should be at the centre of all policy-making Animation, Visual Effects, Gaming and aerospace and defense sector can be one of
decisions including preparation of city master Comics (AVGC) sector, public-private the priority areas which will ultimately
plans. Companies in the battery swapping and platforms with a focus on innovation can help the city embark upon the next phase
leasing domain can be encouraged to promote be encouraged. Well thought out of growth. Development of integrated
the adoption of electric vehicles. Residential fundamental programmes can be logistics and warehousing facilities can be
apartments and complexes should be introduced within the school curriculum promoted in existing aerospace industrial
incentivised to make EV charging as well. Further, alternate employment parks. Strategic alliances with global
infrastructure available within the premises for opportunities can be envisaged in the form manufacturers to expedite local
residents. Local manufacturing clusters need to of industry collaborations with manufacturing of aerospace components
be a key focus area for the creation of an stakeholders in the AVGC sector. can be a high focus area. The Maintenance,
integrated EV ecosystem. Hyderabad’s EV Currently, around 150 AVGC companies Repair & Overhaul (MRO) industry within
ecosystem is likely to witness USD 3- 4 billion of provide direct employment to the aerospace segment in the country is
investments, employing more than 1 lakh approximately 30,000 people.8 With likely to reach USD 2-3 billion in the next
people by 2030.7 significant impetus from the state five years, and Hyderabad is likely to play a
government, the sector can support 0.5-1.0 prominent role in it.9
lakh people in the next 5 years.

7. tsredco.teleangana.gov.in
8. Times of India
9. Ibef.org

savills.in 8
 Hyderabad: The Sprint

POTENTIAL AFTERWORD
HEADWINDS

Like every other city, potential headwinds may lie in the future growth Hyderabad has the makings of an economic powerhouse. The entire
path for Hyderabad. Dependency on a few established sectors may urban agglomeration is expected to grow significantly over the next few
prove to be detrimental, especially in a time of global uncertainty and years. The city’s population is estimated to grow 40% in a span of 15
an ever-evolving tech landscape. Hence, it is even more essential to years and go beyond 14 million by 203510. A significant working age
identify futuristic growth segments and avoid placing all bets on a population, much like other Indian cities, is expected to play a
particular sector or industry. pronounced role in the 6-10% annual GDP growth forecast for the next
5 years11. Global organisations and investors have come to realise
Last mile connectivity is an area of concern and can be improved with
Hyderabad’s potential and are expected to continue their focus on
expansion of metro services to peripheral areas and adoption of the
the city.
TOD model (discussed briefly in an earlier section). Infrastructure
improvement will be a key aspect in equitable growth across Having made its initial mark in a ‘burst’ symbolic of a short-distance
Hyderabad. The concentration of high-quality office stock gives an sprinter, the time has arrived for Hyderabad to make the smooth
indication of the skewed development in the city. More than 90% of the transition now. It is undergoing that transformation and progressively
Grade-A buildings of the city are located within the western parts of acquiring the characteristics and attributes of a marathoner. In the
the city. High vacancy levels (21% as of Dec 2022) in the office market process, it will invariably experience its share of ups and downs, and
continue to be closely monitored by stakeholders. A demand-supply will traverse the proverbial sine-curve. The key lies in consistent
rationalisation for the city is on the cards, or else rentals across city advancement, and Hyderabad is very well poised for this next lap of
micromarkets might get impacted, on account of a heavily tenant- the sprint.
favoured office market.
There needs to be an influx of higher number of a global property
management firms as well, to bring in world-class real estate services
in the local market.
As affordability of real estate is likely to decrease in the future in
comparison to smaller urban centres of the state, affordable housing
might become a challenge, especially in the central and western areas
of Hyderabad. Housing for all should be at the core of all decision-
making processes. Such all-encompassing directional policy-making
will ensure that the growth story of Hyderabad is inclusive of all
10. Worldpopulationreview.com
sections of society. 11. Oxford Economics, Dec 2022
savills.in 10
Savills Savills India Savills India provides services across office leasing,
Savills PLC is a global real estate services provider Savills India is a group company of Savills PLC and project management, capital markets, valuations,
listed on the London Stock Exchange. We have an is a premier professional international property research, consulting, industrial and logistics, and
international network of more than 700 offices and consulting firm. With full-service offices in residential services. Started in India in 2016, the
40,000 associates throughout the Americas, the Ahmedabad, Bengaluru, Chennai, Hyderabad, company employs over 600 professionals.
UK, continental Europe, Asia Pacific, Africa and Delhi-NCR, Mumbai and Pune, the firm serves
the Middle East, offering a broad range of specialist occupiers, investors and developers of real estate.
advisory, management and transactional services
to clients all over the world.

Research Central Management Regional Management Media Queries

Suryaneel Das Anurag Mathur Sesha Sai Chinmoyee Kalita
Assistant General Manager Chief Executive Officer Managing Director Corporate Communications Lead
Research & Consulting Savills India Hyderabad [email protected]
[email protected] [email protected] [email protected]
Aloka Majumder Naveen Nandwani
Assistant Manager Managing Director
Research & Consulting Commercial Advisory & Transactions
[email protected] [email protected]
Megha Maan
Director
Research & Consulting
[email protected]
Diksha Gulati
Assistant General Manager
Research & Consulting
[email protected]
Shashwat Srivastava
Assistant Manager
Research & Consulting
[email protected]
Arvind Nandan
Managing Director
Research & Consulting
[email protected]

Hyderabad Gurugram Bengaluru

Office No. 06A112 3-A, Second Floor, Building 9B 15th Floor, SKAV SEETHALAKSHMI
WeWork Krishe Emerald, HITEC City DLF Cyber City, Phase 3 Corporation No.21, Kasturba Road
Hyderabad 500 081 Sector 24, Gurugram 122 002 Bengaluru 560 001
Telangana, India Haryana, India Karnataka, India

Bengaluru Mumbai Pune

Vaishnavi Tech Park, WM9C+995 403, Tower B, Level 4, The Capital Unit #4, 13th floor
Sarjapur Main Rd, Bellandur Street 3, G Block, Bandra Kurla Complex Phoenix Fountainhead Tower 2
Bengaluru 560 103 Bandra East, Mumbai 400 051 Phoenix Market City
Karnataka, India Maharashtra, India Viman Nagar, Pune 411 014
Maharashtra, India

Chennai Ahmedabad
Savills, 5th Floor, North Wing INC-02, The First Commercial Complex
Harmony Square, New No. 48 & 50 B/S Keshavbaug Party Plot, Vastrapur
Praksam Street, T. Nagar Ahmedabad 380 015
Chennai 600 017 Gujarat, India
Tamil Nadu, India

11
 Savills, the international real estate advisor established in the UK since 1855 with a network of over 700 offices and associates
globally.
This document is prepared by Savills for information only. Whilst the information shared above has been shared in good faith and with due
care with an endeavour to keep the information up to date and correct, no representations or warranties are made (express or implied) as to
the accuracy, completeness, suitability or otherwise of the whole or any part of the deliverables. It does not constitute any offer or part of any
contract for sale.
This publication may not be reproduced in any form or in any manner, in part or as a whole without written permission of the publisher, Savills.
© Savills India 2023.
savills.in 12