Upcoming cities in India: Tier II and Tier III cities

With the recent initiation of the Indian economic and the Investment policies, there is an increased growth in all the sectors in India along with an economic growth. The main areas of the property investments are the metro related areas and the tier I cities. For quite some time, most of the investors have been investing in these tier I cities and the metro related areas which has eventually saturated the areas. Both residential and the commercial investments have burgeoned these areas.

Various large scale investments have made the realty sector quite fast along with an array of challenging projects. Apparently the unplanned development has resulted in the congestion of the city and is filled with residential and commercial properties.

However, since all these main areas are congested, the government of these cities is forced to concentrate on alternative smaller cities like the Tier II and Tier II cities. Few of the areas like Indore, Jaipur, Kochi, Ludhiana, Nasik, Nagpur and Chandigarh are in demand. The Indian real estate is now completely focusing in these areas and is extending new avenues for its development. The realtors are introducing an array of constructions, services and solutions for the development and the benefit of investors.

Also the current situation and demand of the residential real estate market in the Tier I and the metro areas has forced the property investors to move on to the Tier II and Tier II cities. As most of these cities are on the verge of development with wider infrastructure and open space unlike other metro related areas, most of the buyers prefer these areas.

Apart from just the spread of residential projects in the Tier II and Tier III cities, there is also an equivalent demand for the commercial property in these areas. As witnessed the retail real estate in India is on an upsurge and there is an array of retail markets and shops which are coming up in these areas on a fast pace. Also there is an increased change in the lifestyle of people and they have adopted the mall culture.

Owning to all these aspects the developers find these cities more lucrative and also have various options for construction with better returns. Also the developers are witnessing greater investments in these areas when compared to metro cities. Most of the investors prefer investing in these areas because of the lesser time each project takes for construction and they also get better returns. The labour is cheap with safer markets along with a higher yield.

Factors responsible for the growth of real estate in the Tier II and Tier III cities:

• The congestion of the Tier I and metro cities has resulted in the shifting of real estate to the Tier II and Tier III cities. While the realty trend in Tier I cities have reached a saturation point, with the yield gap witnessing significant margin of 9.5 to 10 per cent, the Tier II cities record a yield of 10.5 to 11.5 per cent.
• The Tier II and Tier III cities are flocking up with investors are because of the number of properties available and the affordable prices.
• The government is also taking special measures to provide the smaller cities with infrastructural facilities and the initiation of the SEZs. These factors have also resulted in the promotion of the smaller cities.
• There are various sectors like the pharmaceuticals, financial institutions, educational institutions, IT and ITES sectors which are coming up in these areas and henceforth attracting more number of buyers.
• There is a demand in these smaller cities due to the large scale investments by the corporate sector. This factor is eventually affecting the property prices in these areas.
• The rising property prices in these areas are portraying a promising future to the investors and are driving the investors in buying properties in these areas predicting the long term returns.
• The lack of availability of business equipped infrastructure and exorbitant property prices in the existing metros, various IT, ITES and the BPO companies are targeting the smaller cities with better infrastructure, state-of-the-art office spaces along with skilled manpower.

Henceforth, the Tier II and the Tier III cities are termed as the extension cities of the booming metros.

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