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COVID-19 impact | Housing demand increases in Tier-II and Tier-III cities

The pandemic has propelled more and more people from the smaller cities to explore residential property through virtual platforms. Cities such as Agra and Amritsar witnessed growth of over 100 percent in virtual residential demand over pre-COVID times, while the cities of Vadodara, Ludhiana, Mangaluru, Chandigarh and Lucknow saw more than 80 percent rise.

Representative image

Representative image

Housing demand that had  hitherto remained centred around the top eight cities of India is gaining momentum in Tier-II and Tier-III cities after the COVID-19 lockdown ended. Reverse migration of the corporate workforce and increased flexibility due to remote working is boosting virtual residential and rental demand in these 'shadow cities'.

The recently launched Virtual Residential Demand Index, compiled by online aggregator, states that the demand from small cities had been increasing steadily but saw a significant spike after the lockdown has ended. Overshadowing the metros, the index jumped to 210 points for 'shadow cities' compared to 150 points for the former after the nation entered Unlock 4.0.

Cities such as Agra and Amritsar witnessed an impressive growth of more than 100 percent in the virtual residential demand over pre-COVID times. Vadodara, Ludhiana, Mangaluru, Chandigarh and Lucknow saw more than 80 percent growth in residential demand, the think piece titled Time for Internal Globalisation - Small Cities Setting the Tone for Revival, said.

Amritsar saw a growth of 130 percent, Agra increased by 108 percent, Ludhiana 95 percent and Chandigarh 94 percent, it said.

"Tier-II cities with good infrastructure, air connectivity and affordable real estate prices will grow into mega cities as the young will choose to live in bigger, better houses in their native environment. Many of them will be able to work for companies around the globe from the comfort of their hometown," said Vishal Gupta, managing director, Ashiana Housing.


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These regional urban centres saw a 59 percent growth in the price bracket of less than Rs 50 lakh, with maximum traction coming from cities of Vadodara, Nagpur and Lucknow.

Similarly, the cities of Jaipur, Vishakhapatnam, Kochi and Surat saw maximum growth in demand for residential property in more than Rs 1 crore price bracket over the pre-COVID period. This corroborates the fact that the pandemic has propelled more and more people from the smaller cities to explore residential property through virtual platforms, the report said.

Interest in the smaller cities has been gradually increasing and the share increased to 27 percent in the first half of 2020, as compared to 18 percent in the same period in 2019.

Though there was a sharp decline in April 2020, demand has recovered rather quickly and has been on an upswing since then with virtual interest for residential spaces between June–August 2020, overarching the pre-COVID levels of January–March 2020, the report noted.

Barring three metros - Kolkata, Ahmedabad and Delhi-NCR - the other top cities of Mumbai, Pune, Chennai, Hyderabad and Bengaluru did not see more than a 50 percent growth over pre-COVID times, according to the report.

"On our platform during the last few months, we have seen a noteworthy increase in interest levels for residential properties especially from non-metro cities such as Amritsar, Chandigarh, Vadodara, Nagpur, Vijayawada and Coimbatore," said Dhruv Agarwala, Group CEO,

"Our Virtual Residential Demand Index shows this trend more saliently post-May 2020," he added.

Going forward, Agarwala said, "Reverse migration driven by remote working could have powerful reverberations on the future of residential demand."

The report noted that the current pandemic driven crisis has brought structural changes in these 'shadow cities', which has notably accelerated the process of deeper market penetration across sectors.
Moneycontrol News
first published: Sep 30, 2020 04:18 pm
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