Hyderabad Housing Market Faces Squeeze as Sales Slow and Construction Costs Rise

 

By The Realty Times | Real Estate News Services

Hyderabad: Hyderabad’s residential real estate market is entering a challenging phase, with housing sales slowing even as construction costs continue to rise. The combination is putting pressure on developers’ margins while keeping property prices relatively firm, creating a difficult balancing act for the city’s housing market.

According to the Hyderabad Housing Report for H1 2026 by CRE Matrix and CREDAI Hyderabad, the city recorded sales of 26,068 homes during the first half of 2026, a 13% decline year-on-year. This was the weakest half-year sales performance since 2022. At the same time, developers launched 49,656 housing units, up 37% from the previous year.

The sharp difference between new launches and sales has resulted in a significant increase in unsold housing stock. Hyderabad’s unsold inventory reached 1,42,722 units, up 21% year-on-year, translating into an inventory overhang of around 29 months at the prevailing sales pace.

However, industry experts point out that the inventory does not necessarily represent an immediate oversupply crisis. Only around 21% of the unsold stock is ready for possession or scheduled for completion during 2026, while a large portion is expected to be completed in subsequent years.

While sales volumes have weakened, developers are facing higher project costs. Direct construction expenses have reportedly increased by around 8% to 10%, driven by higher prices of steel, cement, bitumen, finishing materials and other construction inputs.

The additional cost burden is estimated at approximately ₹150–₹300 per sq ft, depending on factors such as project size, building height, design complexity and construction scale. Steel price increases alone are estimated to have added around ₹30–₹50 per sq ft to construction costs.

For large residential projects, even a relatively small increase in construction costs can translate into a substantial rise in the overall project expenditure. Developers therefore face increasing pressure to protect margins without weakening demand through sharp price increases.

Despite the slowdown in sales, Hyderabad has not witnessed a broad-based correction in residential prices. The weighted average transacted price increased 8% year-on-year to ₹4,964 per sq ft in August, according to the latest industry data.

The H1 2026 data also shows a continuing shift towards higher-value homes. The average ticket size increased 10% to ₹2.03 crore, even as the number of homes sold declined. This indicates that premium housing continues to account for a significant portion of the market.

The next six to 12 months could be crucial for Hyderabad’s residential market. Developers are likely to adopt a more cautious approach to new launches, while closely monitoring buyer demand and construction costs.

If steel, cement and other input prices remain elevated, developers may have limited room to reduce prices. At the same time, slower sales and rising inventory could encourage more flexible payment schemes, targeted offers and phased project launches.

Hyderabad’s strong employment base, infrastructure expansion and growing premium housing demand continue to support the long-term outlook. However, the current combination of slower sales, rising inventory and higher construction costs suggests that the city's real estate market may be entering a period of consolidation rather than the rapid growth seen in previous years.