By: Abhay Garg, Director, Curo India
Track2Realty Exclusive: The property rates and cost of living in the metros like Delhi, Mumbai and Bangalore have been soaring drastically over the years and owing to this, these cities have reached a kind of stagnation in terms of real estate and retail growth. This scenario has shifted the focus of investors as well as the customers towards the tier II & tier III cities.
Many Retailers are expanding to smaller towns and cities across India to tap a new breed of customers who are getting richer and increasingly willing to shell out money to shop at modern retail formats. Also, these cities are now becoming new real estate hubs in India with both commercial & residential projects getting developed at a fast pace.
Urbanisation and rising household income are some of the major factors that influence demand for residential and commercial real estate and growth in the retail sector. Real estate follows industrialization, as people come to work they bring their families and settle in and around big cities.
This has increased the demand in the residential segment. Growth in this segment is thus primarily driven by growing urbanisation, rise in the number of white-collar professionals, rising incomes, etc. The residential segment is again witnessing growth in demand for luxury and super premium homes among the globe-trotting executives, new and successful businessmen, non-resident Indians (NRIs), and so on.
However, with growing urbanization beyond the metros, it can now be said that most of the growth in the real estate industry can be visible in tier 2 and tier 3 cities. Despite being a highly fragmented market, affordability of homes has made these cities lucrative for customers.
People have started investing in tier two and three cities now because the tier one cities have reached a kind of torpor. As the peripheral infrastructure including transportation, education and employment improves in these cities, the real estate industry is seeing consequent growth.
The rising income levels and the growing business environment have also enabled the development of the retail sector in these cities. The industry reports estimate that 35 per cent of the retail space will grow in Tier II and Tier III cities, in the coming years.
Major Indian and multi-national companies have established their business in these cities. Today, one can witness a gamut of business activities that were never heard of before.
Tier III cities like Lucknow, Ludhiana, Jalandhar, Guwahati, Surat, Nagpur, Indore, Goa, Mysore, Coimbatore, Visakhapatnam, Kochi, Vijayawada, Mangalore, Trivandrum and Baroda have great potential for growth. One of the reasons that make these cities a preferred choice for investment in business and real estate activities is the cost factor. As compared to Tier I cities, the capital values are much lower in Tier II and Tier III cities. The cost of labour too is low.
The rental is proportionate to the capital prices, and manpower is less because of the cost of living. This is one of the reasons that many IT and ITES companies are setting up business here. Retail giants and other business conglomerates are eyeing these cities as potential investment destinations.
…to be continued
