This paper proposes a method of installing phasor measurement units (PMU) in multiple stages. The scheme is developed on the concept of bus tier system and provides an optimal number of PMUs with a strategy to install them in a particular stage. The synchronized phasor measurements from the PMUs placed by the proposed method are used in developing a hybrid state estimator (HSE). The HSE estimates the voltage phasor at all the buses of a power system with a limited numbers of PMUs in steady state as well as in the presence of disturbances even in that part of network which is unobservable through PMUs. Performance of the proposed phased installation scheme for HSE is evaluated on the number of standard test system and the simulation results shows an improvement in the accuracy of the estimated states as compared to the existing methods in the literature.