GROWTH MARKETS FOR FUTURE-TIER II and III CITIES

GROWTH MARKETS FOR FUTURE-TIER II and III CITIES 

As Indians, we love our real estate. We can see it, stand on it and experience it. It also generates an income, and if held long enough, multiplies our money. Concurrently a number of tier II and III cities have been found to deliver a successful economic growth in the past decade. There are many factors that determine how, when, and where you decide to invest in real estate. Some of them include where you live, if you want to live in the house you’re investing in or if you want to use it as an investment and earn rent from it, how much are you willing to invest, how many rooms do you want, what amenities do you want and so on.

 One has been noticing significant improved real estate options in cities like Chandigarh, Mohali, Nagpur, Lucknow, Agra, Udaipur, Nagpur, Dehradun etc. Real estate firms and IT companies are observing a shift to these cities for cheaper real estate and manpower. Evidently, there are many factors driving the growth of real estate in these tier II and tier III cities - walk-to-work concept, quality lifestyle, media exposure, the emergence of software companies and an increased affinity to retail.

Whether it's banks, BPO's, cinemas, FM stations, electronic companies like Lenovo, Nikon India, and Sony India; everyone is looking towards these smaller cities for more profit.  Even in case of design, cities like Ahmedabad and Pune with their multitude design centres and institutes point towards the availability of skilled design talent in these cities. In smaller cities like Mysore and Mangalore where fewer rentals are complimented with good infrastructure, even preschools have been growing at an incredible 120% per annum. Chandigarh, Coimbatore, Vadodara, Jamshedpur have become the hub of e-commerce and feature as the top four small cities for online shopping. Towns of Gujarat like Ahmedabad, Surat, Rajkot and Vadodara have made huge progress industrially. An encouragement is being showered for air travel between these tier cities and efforts are in progress on getting them on the aviation map. 

India's hospitality sector is also envisaged to witness a steep growth in these cities.

 Factors responsible for growth in Tier II and Tier III cities

A number of factors co-exist that make these cities as an attractive investment destination for all. In a recent study of Top 10 emerging business destinations in India, conducted by various global real estate solution providers, the growth in Tier II and Tier III cities is aided by 'the increasing disposable income of the people that has created immense opportunities for companies looking out for new markets to grow'. The study also mentions that companies being drawn to these cities are being enticed due to the 'availability of talent pool at a lower cost, reasonable real estate prices and a 'conducive business environment' created by State and local governments. Further, Tier II and III cities because of 'outstanding performance' in skill-based manufacturing industries such as automotive, consumer and capital goods, engineering, textiles, pharmaceuticals and sectors such as biotechnology and IT/ITeS, have witnessed industrial growth, paving the way for rapid urbanisation. 

The study identifies the cities of Ahmedabad, Bhubaneswar, Chandigarh, Coimbatore, Jaipur, Kochi, Indore, Nagpur, Vadodara and Visakhapatnam as the top 10 emerging cities in India. Whereas Coimbatore has more than 25,000 small and medium enterprises (SMEs), Vishakhapatnam has been found to be suitable for industries such as mining, heavy manufacturing etc. Jaipur has been counted as a significant service sector investment while Ahmedabad has been hailed as an attractive investment in the manufacturing sector.

Viewed as excellent investment options, these places come to be more cost-effective than metros which have escalating property prices. Many people have been investing in these cities for their second homes for aged parents for whom the fast paced life of metros is a deterrent. The improvement in connectivity has made these cities more accessible and hassle free. International airports are a part of cities like Chandigarh and Amritsar. These cities also provide great opportunities for investors like NRI's who want to avoid going vertical and prefer a bungalow spread over large acres of land. Also, tier II and III cities mitigate the disadvantages that are associated with metros - of a reduced quality of life, high cost of living, expensive transportation, huge traffic and travel time, expensive house rent and education. Whereas metros are suffering various drawbacks in projects like delay in execution, the overall slowdown in demand and a dip in the supply, smaller cities like Pune are experiencing increased demands for mid-segment housing. Metros are on the way for Jaipur, Kochi, Pune, Chandigarh, Ahmedabad, Kanpur, Ludhiana, Bhopal, Indore, and Faridabad. 

The overcrowding in Tier I cities have compelled people to move out to open spaces with wider infrastructure, and nature-friendly ways. A change in real estate trends is noticed in cities like Jaipur, Chandigarh, Indore, Nasik etc. Many like Mohali and Agra are being considered as a favourite destination for global investors. Developers like Tata Housing, Lodha Builders, Raheja, Ansal Housing and DLF have launched projects in these smaller towns.

Also with developers offering lifestyle facilities, security and comforts in their projects in these tiers, the customers find many reasons to get attracted here. Tier II and tier III cities come with fewer risk factors as the appreciation in real estate prices is gradual, unlike metro cities which experience a steep escalation.

 So with these factors and survey reports conducted by various global real estate service solution companies, one thing is clear that Tier II and Tier III cities are the new investment cities for real estate. Developers are launching new projects and people are buying and investing in these properties. At last, it’s your money and your decision. So think wisely and act smart.

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