Real estate sector witnesses solid growth in Tier II and III cities

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The Indian real estate market is not just growing in metro cities like Bangalore, Delhi-NCR, Mumbai, Chennai and Kolkata. There is significant growth seen in Tier II and III cities of the country as well according to reports. Real estate developers and investors are slowly shifting their preferences towards these cities on account of aspects like sky-high property prices in metro cities, unavailability of land, congestion and infrastructural hurdles, reducing demand, higher levels of inventory and high costs of living.

Tier II and III cities should witness handsome real estate growth over the next few years since the urban population of the country could cross a whopping 850 million by the year 2050 and 50% of this population is expected to be between 19-58 years of age and this will steadily lead to more housing demand in these areas. Disposable incomes are now higher in smaller towns and cities on account of industrial, agricultural and manufacturing growth in addition to the boom in sectors like pharmaceuticals, textiles and capital goods. Cities like Jamshedpur, Coimbatore, Chandigarh and Vadodara are already regarded as top e-commerce hotspots while Surat, Vadodara and Ahmedabad are industrial behemoths as well. Vizag is known for its heavy manufacturing and mining industries while Coimbatore is already regarded as a key SME hub. Jaipur is also known for receiving hefty investments in the service sector.

In Tier II and III cities, land and labour come at more affordable costs which make it more profitable for developers to come up with large scale housing projects and even customers benefit from the lower prices. The PMAY subsidies and the National Urban Housing Fund are key growth drivers in the affordable housing segment which has also received infrastructure. The CLSS scheme offers subsidies for buyers in the LIG, MIG and EWS categories. The Housing for All by 2022 mission will be the major driver behind real estate growth in Tier II and III cities. The Government is focusing on infrastructure development across these cities including new airports, expressways, metro corridors and flyovers. There is the Smart Cities blueprint which proposes the development of 100 such cities in the country.

RERA has brought in more transparency and accountability as far as the Indian real estate sector is concerned. Smaller cities have a higher population of mid-income buyers and there is huge demand for residential housing which is still untapped to a large extent. Ticket sizes are lower for residential housing units across these cities. There is more scope for price appreciation in Tier II and III cities as well on account of infrastructural development. Retailers are also looking to tap customers in these cities. The warehousing sector is also pinning its hopes on the development of tier II and III cities for future growth. There will naturally be more demand from end-users in these cities and this augurs well for the Indian real estate sector going forward.

Resident Editor