Dec 2019 , by , in Property Talk

In recent years, the tier 2 and 3 cities have pulled in more than $1 million investment and are catching more eyeballs of the developers and investors. The Realty+ Conclave in Bengaluru discussed this trend.


India is on the move, apart from the metro cities, India’s smaller cities are on the rise and catching up with the bigger metropolises. The national-level projects such as Smart City Mission, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), metro rail projects and Prime Minister Awas Yojana (Urban), have made these cities attractive destinations for commercial as well residential purposes. Mudassir Zaidi, Executive Director – North, Knight Frank elaborated, “The non-metro cities have picked up significantly due to various infrastructure projects & schemes launched by the Central Government. Improved connectivity, education and health care facilities has facilitated growing urban migration towards these cities rather than the metros. In terms of retail development, around 28% or 18.2 million sq ft is slated to come up in tier 2 and 3 cities by 2022.”

Ramesh Bulchandani, Chairman, KMB Group added, “We anticipate retail development to further go up as the lifestyle aspirations of residents of smaller cities will grow with better job opportunities. Moreover, focus will also be on buying homes for parents in gated communities or condominiums. Some smaller cities in South are known as education hubs and have their own growth story.”

The infrastructure development, the air, road and rail connectivity as well as moving of IT & non IT companies to tier 2 cities because of favourable business ecosystems indicates that these cities are the new realty growth centres. As per industry reports, out of the Flipkart and Amazon’s 19000 crores deals, about 10,000 deals came from tier 2 and 3 cities. That shows huge investment potential and these cities as emerging retail destinations, due to better growth prospects.

Tier-II cities have accounted for 83% of total Private Equity investments inflows since 2014. Also, Tier II & III cities exhibited higher CAGR of outstanding home loans, ranging from 15-36 per cent during the period between 2012-13 and 2017- 18 as against 8-12 per cent observed in four metros.


• North: Chandigarh, Amritsar, Srinagar, Jaipur, Agra, Varanasi

• South: Visakhapatnam, Mysore, Kochi, Thrissur, Coimbatore, Tirupur

• East: Guwahati, Patna. Jamshedpur, Ranchi, Bhubaneshwar

• West: Surat, Rajkot, Nagpur, Nashik, Aurangabad

With government focus on affordable housing, there has been a steady demand for ₹30 lakh segment across smaller cities and a steady absorption in the ₹40-65 lakh segment. The trend of sector specific zones coming up in tier-II cities such as steel industries in cities like Bellary, Koppal, Raichur, cement producing zone like Bagalkot, Bijapur, Gulbarga, Food handling sector in Shimoga, Mysore, Bijapur and the ITES and IT companies in Bangalore, Mysore, Hubli- Dharwar, and Belgaum, among others.”


By 2030, it’s estimated that India will have 104 tier-II, 331 tier-III and IV, and only 155 tier-I cities. The recent trend witnessed in tier-II cities has been the homebuyer’s inclination moving from independent houses to apartment complexes and townships. The reasons vary from the younger population, nuclear families to need for lifestyle amenities and safety & security for elderly. “We have to create a newer model of real estate development to cater to the new demands of the market of tier-II cities. Each city will have its specific requirements and now developers will have adopt market sentiments while designing developments, said P C Sukanand, CMD Eminence Homes & Spaces.

The inflow of NRI investments has increased to 30 -40%, in premium segment in tier-I and tier-II cities. This has also significantly contributed to the rise of smaller towns. Undoubtedly, smaller cities have started offering better quality of life and infrastructure. Substantive investments are being made in the infrastructure and economic development. While, the smaller urban areas have the potential to scale up and match with the pull factors of megacities, the resolution of bottlenecks like, speedy implementation of government infra-projects, land acquisition and creation of better social infrastructure will ensure their position as smart cities and serious competition to the metro cities.

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