The Rise of Smaller Cities


Bigger cities are witnessing high property prices, a saturation of land and subdued demand; this has led the buyer to look for greener pastures that are cost-effective markets, and this brings the non-metro (Tier II & III) cities in focus. One of the most important factors that have made it all possible is the improvement and fast-growing infrastructure in these cities. Many Government schemes AMRUT, Smart Cities, etc have also played a significant role in the growth of these cities.

Many reports put out the figures of rising real estate Investments in Tier II & III cities at around 20% over last year, which is a clear sign of the movement of buyers and investors to these cities. Indeed, the development of physical and social infrastructures has pushed the affordable housing demand in these cities. Movement of businesses and employment centres, townships with mixed developments, etc. in these areas is the main catalyst for the increasing real estate demand.

Advantages like that of a good location, easy accessibility factor, an improvement in infrastructure, increased connectivity with its suburbs and availability of skilled manpower have turned these cities into an attractive business destination for many developers. As the small cities have not seen planned development in the past, the developers got a chance to introduce the residents of these cities to the planned development.

Every realtor agrees that the next significant movement is towards these smaller towns; this is but natural, and the need of the hour also. The focus should be to lessen the burden on bigger towns. It also means that the government has to work on developing employment opportunities in these cities; this is good for the overall economy of the country.

Real estate searches in Tier II and III cities have seen smartphone penetration, and with this, the real estate data for these cities is available to everyone. A larger number of cities are now getting the attention of property buyers and investors. Smaller cities now have investment-grade retail assets that can generate good returns. With the movement of offices, residential has also gained momentum in these cities.

In fact, with the launch of REITs, the Indian retail assets are also becoming lucrative in Tier II and Tier III cities. The sector has been witnessing an upsurge in tier II and tier III cities since 2015. Many private equity funds were investing in retail to diversify their investment portfolios. Now the market will further improve and bring in more investments with an assurance of better returns.

One has to be careful as these areas have both organized builders and unknown ones. So, one has to choose carefully and go for developers of repute. Most of the investment in these cities is happening from people who live in Tier-I cities who believe in long term investments and rental incomes.

Author: Kushagr Ansal, Director Ansal Housing Limited & President CREDAI Haryana