The 21st century has been earmarked as the age of Information Technology (IT), and India has become one of the major players in the global IT industry over the past few decades. The growth of the IT sector in India can be attributed to a number of factors, including a large pool of highly educated workforce, as well as pro-business government policies such as the National Policy on Information Technology (2012), Digital India (2015), Start-Up India (2016), Special Economic Zone (2000) amongst others, that have encouraged the growth of the industry in the country.
The IT industry in India is a major contributor to the country’s economy, with the sector expected to reach $350 billion by 2025, according to the National Association of Software and Service Companies (NASSCOM). The growth in the sector has also fuelled the growth in the major IT hubs of India, such as Bengaluru, Hyderabad and Pune, placing them on a global map. These cities are now among the top IT destinations in the world, attracting the attention of global enterprises looking to outsource their operations.
To support economic growth and to create an ecosystem conducive to businesses, the IT hubs of India, Bengaluru, Hyderabad, and Pune, have witnessed significant growth in their physical and social infrastructure. Each of these cities hosts an international airport and efficient connectivity at the regional level through major highways and expressways.
Additionally, the development of new IT parks has been taken up under various central and state government schemes to accommodate the growth of the services sector in these cities. These projects have improved the liveability of the IT cities, which is evident from the fact that cities such as Bengaluru and Pune have secured first and second positions, respectively, on the Ease of Living Index (2021). All these factors have added to the attractiveness of these cities, thus attracting the workforce from all over India and leading to a visible change in the demographic profiles of these cities. For instance, Bengaluru (53 per cent) has the highest decadal growth amongst the top cities, according to the Census of India.
The rise in the number of employment opportunities and individuals moving to these IT hubs has led to a corresponding increase not only in commercial real estate but also in demand for retail spaces and residential properties. Hyderabad and Bengaluru have taken the top spot in office absorption as compared to the other top cities of India.
The economic dynamism has also catapulted the residential real estate growth in these cities. Our market insights suggest consistent growth in the market share of these IT hubs in overall property demand in the major cities of India. To put things in perspective, the combined contribution of Bengaluru, Hyderabad, and Pune in the total residential sales in the top cities of India has increased from 20-25 per cent in 2010 to 40-45 per cent by 2022.
A deeper look at the residential dynamics in these three cities indicates that Pune currently took the highest share of 49 per cent in the overall property sales (in Bengaluru, Hyderabad, and Pune) in 2022. While Pune took the highest share, Hyderabad has been making significant strides in residential realty and has overtaken Bengaluru, especially since the pandemic.
The market data insights suggest that Hyderabad accounted for a 28 per cent share in combined property sales in IT hubs in 2022, while Bengaluru accounted for 24 per cent during the same period. Hyderabad has shown exceptional resilience amidst the pandemic headwinds as compared to the other top cities. While new residential supply was at an all-time high in 2022, with 82,800 units launched, the property sales grew by 59 per cent YoY during the same period – highest in the top eight cities of India.
A combination of factors has worked for the city as the state government of Telangana has been heavily investing in developing the city's IT infrastructure by building new IT parks and special economic zones, which have attracted several top global and national IT companies to set up shops in the city.
The overall trends indicate that the boom in IT cities such as Bengaluru, Hyderabad, and Pune has led to a rise in new developments, altering the real estate landscape positively. The white-collared employment opportunities and rise in the standard of living have attracted several mid-and-high segment homebuyers to these IT hubs.
The property prices in all three cities have appreciated in the range of 7-9 per cent in 2022. Notably, not just apartments but other residential formats, such as plots, have also picked up significantly amongst consumers in these IT hubs. For instance, according to Housing Research, the prices for plots have appreciated by 21 per cent and 13 per cent in Hyderabad and Bengaluru, respectively.
While these markets are end-user-reliant, the appreciation in capital values is acting as a motivational factor for investors seeking mid-to-long-term investment opportunities. With the IT industry showing no signs of slowing down, we believe these cities are poised to continue on their growth trajectory, consequently benefitting their property markets too.
Renuka Kulkarni, a seasoned real estate professional, brings over five years of diverse experience in research, consulting, and architectural design within the urban sector. Her expertise spans public and private projects, showcasing proficiency in real estate research, trend interpretation, and policy analysis. With qualifications in architecture and a master’s degree in Data Science (Business Intelligence & Data Analytics) from IIIT Bengaluru, along with an M. Tech in Urban Development and Management from TERI School of Advanced Studies, New Delhi, Renuka seamlessly blends data analytics with market insights, offering a holistic understanding of the industry in her research pieces.
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