Hyderabad Construction Sector Slows as Rising Costs Hit Middle-Class Housing Demand

Hyderabad’s construction market is witnessing a sharp slowdown, with the impact now spreading from large real estate developments to middle-class housing projects and individual home construction across the city. Rising construction costs, weaker housing demand and labour-related challenges have significantly affected new project launches and execution activity over the past two years.

According to industry data, new project completions in Hyderabad dropped drastically to nearly 0.6 million square feet in the first quarter of 2026, compared to around 6 million square feet in the fourth quarter of 2025. The slowdown has also reflected in declining permit-linked revenues for the Greater Hyderabad Municipal Corporation (GHMC), indicating reduced construction activity across several categories.

A Vestian report stated that new completions across India declined 36 per cent quarter-on-quarter to 9.7 million square feet during Q1 2026. In Hyderabad, however, the decline has been more severe, especially in the mid-income and small housing segment.

Industry experts say the biggest impact has been on middle-class housing demand, which traditionally supports small apartment projects, plotted developments and independent house construction. Several developers have shifted their focus towards premium and luxury housing, reducing affordable options for salaried and middle-income buyers.

Builders are also facing rising construction costs across multiple segments. The Rig Owners Association recently increased borewell drilling charges by nearly 60 per cent. Rates for drilling up to the first 100 feet increased from ₹50 per foot to ₹80 per foot. Charges now stand at ₹100 per foot for 101–200 feet, ₹130 for 201–300 feet and ₹170 per foot for 301–400 feet.

In another setback, the Twin Cities Centering Workers Union demanded a sharp increase in centering charges from ₹30–35 per sq. ft to ₹50 per sq. ft, impacting civil works for smaller residential projects.

Builders say higher borrowing costs, labour shortages and rising input prices have delayed construction decisions, particularly in peripheral growth corridors. Some developers have reported a nearly 40 per cent decline in business during the last financial year.

Despite the slowdown, Hyderabad continues to remain one of India’s key long-term real estate markets due to ongoing infrastructure expansion, IT growth and strong demand in premium residential corridors.