Tier 2 & 3 Cities markets are drivers for the Real Estate sector in India

The Indian economy continues to stay resilient amidst the global economic turmoil caused largely by global unrest, anticipated recession and COVID-19 pandemic. This resilience in the domestic economy comes largely due to the tremendous growth and development that Tier2 -3 markets have shown in the recent years. The pandemic accelerated the development of the Tier 2-3 cities or the ones we call real Bharat as they already had a number of benefits to show such as, lower costing of living, better quality of life, improving infrastructure and also their proximity to urban regions, making them an attractive option for investors and consumers alike.

Commenting on this topic Anant Rajegaonkar, past President CREDAI Nashik, Vice President CREDAI National said, “The current metro cities are seemingly saturated and thus the growth opportunities are fringe. Investors and consumers are thus looking beyond metros, towards key Tier 2-3 cities that could potentially be ‘new metros ‘of the future. Cities which are replete with natural resources, have proximity to metro markets and show potential for economic development are being considered by the government as new pastures for socio – economic development. The government has shown clear intent about focusing on infrastructure development across these potential Tier 2-3 cities. There is a proposed allocation of INR 20,000 crore for building 25,000 km of highways in FY 2022-23 will have a huge impact on the demand for real estate, especially in non-metro markets. These new projects will provide accessibility to smaller cities and thus businesses and consumers can choose to invest in these new markets and still stay connected to metro cities. So, what are the key factors driving interest among investors to look at Tier 2 – 3 markets? Tier 1 cities have a stressful lifestyle and no mental peace in these continuously bustling cities. But a Tier 2 city has much more open spaces, better air, better healthy ambience and lesser stresses, thus offering a peaceful lifestyle. The central and state governments are also taking initiatives to develop an industrial base, commercial and educational institutions in these cities, thus there is an uptick for infrastructure. Most importantly, Tier cities have good connectivity with major cities and proper access to necessary social facilities such as medical care, education, recreation etc. Lucrative job opportunities are emerging in these cities, as business and finance stalwarts have been setting up their bases here. It provides ease of living for people and a sense of mental peace.”

He further added, In the coming quarters, the country will likely witness an increase in residential and commercial supply. A significant portion of the housing supply will come to Tier 2 and Tier 3 cities in addition to the Tier 1 metros. Development firms are figuring out where the maximum post-epidemic housing demand will be in order to determine where to focus their next efforts – Tier 2 and Tier 3 cities are the places to look for future growth. Commercial properties like office spaces, warehouses, co-working, retail, etc., are already seeing a surge in tier 2 & 3 cities and the increased economic activity in towns has created jobs and employment for more people. As a result, per capita income has increased that has been fueling real estate investments.

As the disposable income increases and commercial establishments increase, there will automatically be a demand for residential real estate. Here land prices are much less, labour is cheap and with lesser players in the market, most developers want to benefit from the first mover advantage. The Internet has globalized the aspirations of all Indians. The people in these cities and towns are well aware of the developments across the world. They expect to have world-class amenities to be made available to them in their cities. Like everything else, this sentiment has fueled the demand for real estate too in Tier 2 and 3 cities.

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