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/

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 Hyderabad: The Sprint

A HIGH GROWTH TRAJECTORY

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

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

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

3. Telangana IT, Electronics and Communication Dept.

4. Times of India

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

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

7

EV Ecosystem
Adequate charging infrastructure creation
should be at the centre of all policy-making
decisions including preparation of city master
plans. Companies in the battery swapping and
leasing domain can be encouraged to promote
the adoption of electric vehicles. Residential
apartments and complexes should be
incentivised to make EV charging
infrastructure available within the premises for
residents. Local manufacturing clusters need to
be a key focus area for the creation of an
integrated EV ecosystem. Hyderabad’s EV
ecosystem is likely to witness USD 3- 4 billion of
investments, employing more than 1 lakh
people by 2030.7
7. tsredco.teleangana.gov.in
8. Times of India
9. Ibef.org
savills.in
Hyderabad: The Sprint
AVGC
For promotion and growth of the
Animation, Visual Effects, Gaming and
Comics (AVGC) sector, public-private
platforms with a focus on innovation can
be encouraged. Well thought out
fundamental programmes can be
introduced within the school curriculum
as well. Further, alternate employment
opportunities can be envisaged in the form
of industry collaborations with
stakeholders in the AVGC sector.
Currently, around 150 AVGC companies
provide direct employment to
approximately 30,000 people.8 With
significant impetus from the state
government, the sector can support 0.5-1.0
lakh people in the next 5 years.
8
Aerospace
SEZs or enterprise hubs dedicated to the
aerospace and defense sector can be one of
the priority areas which will ultimately
help the city embark upon the next phase
of growth. Development of integrated
logistics and warehousing facilities can be
promoted in existing aerospace industrial
parks. Strategic alliances with global
manufacturers to expedite local
manufacturing of aerospace components
can be a high focus area. The Maintenance,
Repair & Overhaul (MRO) industry within
the aerospace segment in the country is
likely to reach USD 2-3 billion in the next
five years, and Hyderabad is likely to play a
prominent role in it.9
 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
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Savills
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listed on the London Stock Exchange. We have an
international network of more than 700 offices and
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Savills India
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is a premier professional international property
consulting firm. With full-service offices in
Ahmedabad, Bengaluru, Chennai, Hyderabad,
Delhi-NCR, Mumbai and Pune, the firm serves
occupiers, investors and developers of real estate.
Savills India provides services across office leasing,
project management, capital markets, valuations,
research, consulting, industrial and logistics, and
residential services. Started in India in 2016, the
company employs over 600 professionals.

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