With the country expected to urbanise at a rate of around 36 percent this year and 50 percent by 2050, the focus will shift to tier-2 towns such as Bhubaneswar, Coimbatore, Indore, Jaipur, Kochi, Lucknow, Nagpur, Surat, Thiruvananthapuram and Visakhapatnam that have the advantages and development potential to be the next promising destination for the real estate sector, a report by Cushman and Wakefield, a real estate consultant and apex body of real estate developers Confederation of Real Estate Developers' Associations of India (CREDAI) released on October 6 at the 21st NATCON being held in Sharm El Shikh, Egypt, has said.
The 21st edition of NATCON, organised by CREDAI at Egypt, is Asia's largest annual real estate national convention, held in the presence of 1400+ delegates. The two-day convention will host discussions and debate on real estate subjects including technological innovations, token / fragmented ownership, sustainable and green housing, commercial real estate, tier 2/3/4 growth centres among others.
While Delhi NCR, Mumbai, Bengaluru, Pune, Hyderabad, Chennai, Kolkata, and Ahmedabad continue to be the key eight real estate markets, the report anticipates that these 10 tier-II are soon going to add more power to the India-growth-story, propelling the nation's development forward.
The cities have been selected based on indicators pertaining to population, infrastructure, talent pool, income, ease of living, and housing affordability, the report said.
The report highlights how rising urbanization is putting pressure on the existing infrastructure across the tier-I cities as they try to fulfil the growing demand for quality-built spaces. The country is urbanizing swiftly with the urbanizing rate rising by 32 percent in 2013 to around 36 percent in 2023 and this is shifting the focus towards markets that have the advantages and development potential to be the next promising destination for the real estate sector, the report said.
“As India continues its journey of economic growth and witnesses higher rate of urbanization, we anticipate newer cities to fuel the future growth of the commercial real estate market. We believe this report will prove to be invaluable not only for corporate occupiers exploring alternative locations beyond the top 8 real estate markets but will also provide insights to developers on the kind of opportunities that exist in their own domains,” said Boman R Irani, President CREDAI.
“The report shares invaluable insights on the country’s growth story with the real estate industry as one of the key drivers. We are estimated to be the fastest growing major economy and are on course to become a $5.0 trillion economy by FY2026-27. But to fulfill our ambition, it is increasingly becoming evident that we need to further accelerate our pace of economic growth and create more metros. It is India’s tier-2 cities that are going to significantly contribute to the nation-building narrative. With this report, we aim to spotlight the potential of the top 10 emerging cities,” said Anshul Jain, Head of APAC Tenant Representation and Managing Director, India & South East Asia.
"It’s not only the job of top eight cities to contribute to real estate's growth story. As many as 10 Tier 2 cities are also expected to contribute to the growth," he said.
"The current rate of urbanization is around 36 percent and by end of decade it will touch 40 percent and by 2050 it would touch 50 percent and we will be far ahead of the world in terms of urbanisation," he said.
Rising incomes and consumption levels have made tier-II cities a magnet for retail investments. As large Grade-A malls and prominent highstreets are getting developed, India’s tier-II cities are evolving into major consumption hubs, a trend that is likely to gain momentum in the coming years. The residential sector has also witnessed significant growth in many of these cities and they perform well on affordability parameter, the report noted.
Manoj Gaur, Chairman, Credai National, said in his inaugural speech that it is the best time for the Real Estate sector provided it does not repeat past mistakes... The sector has to be answerable to its customers and all stakeholders and adopt new technologies."
The report takes into consideration parameters like population, economic prowess and potential attractiveness of the cities from commercial real estate to identify the emerging cities.
Moreover, parameters such as tertiary education enrolment, population size, and ease of living have been assigned highest weights compared to others as these are largely the foremost reasons for corporates to move their office base to a new location. In aggregate, the report focused on infrastructure and connectivity as parameters that are important drivers of commercial activity today.
The study also considered the Metro Development Index data that combines operational metro routes (in KMs) as well as under-construction and proposed metro routes. Other indicators include the population growth (for the latest census decadal period), house prices (to measure affordability across quality Grade-A projects) and GDP per-capita (to measure consumption potential or discretionary spending), all of which potentially offering a 360-degree view of the real estate market development potential across the selected tier-II cities.
Cushman & Wakefield India research shortlisted the 17 cities with an eye to represent all regions of India, on the basis of their economic size, commercial real estate (office & retail) market momentum, occupiers’ interest level, as well as internal on-ground research.
The 17 cities were then put to test through a detailed scorecard using parameters that represent its market size (population) and growth, ease of living, infrastructure, talent pool availability, income, and housing affordability. We believe these effectively cover the set of parameters that corporate occupiers or retail brands would consider before deciding to enter a city. Besides, some of these parameters are also useful for migrants who are considering relocating to a city.
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