The real estate market has always been crucial to the Indian economy. The industry's contribution to the country's GDP, job creation, and attracting foreign investment has been significant.
As the Indian economy continues to grow, so does the demand for real estate. While Tier 1 cities like Mumbai, Delhi, and Bangalore have been the traditional hotspots for real estate investment, Tier 2 cities are now emerging as attractive destinations. With the government's focus on Tier 2 city development and Tier 2 city infrastructure, many experts predict that 2023 could be the year of a real estate boom in these cities.
Shravan Gupta, the Executive Director of Emaar India, states that Tier 2 cities are the country's new hub of real estate development. He believes these cities have enormous potential due to their favourable location, affordable pricing, and infrastructure development. According to him, the demand for housing in Tier 2 cities is increasing and will continue to grow in the coming years. Job opportunities, migration, and a better quality of life drive this demand.
Let's delve into the factors behind this trend and explore what makes Tier 2 cities an excellent investment opportunity for the savvy real estate investor.
Factors Driving Real Estate Growth in Tier 2 Cities
1. Changing landscape
The development of Tier 2 cities is gradually changing the real estate landscape. Infrastructure development, improved connectivity, and favourable government policies are the major contributors to this growth. Tier 2 cities have always been a potential market for investors and homebuyers, but the infrastructure and connectivity were not favourable. However, with the government's focus on developing Tier 2 cities, the situation has changed, making it a promising investment opportunity for real estate developers and investors.
2. Rapid urbanisation
India's population is rapidly urbanising, with more and more people moving to cities in search of better opportunities. Tier 2 cities are no exception to this trend, and they have seen a significant increase in population over the years. This growth has increased the demand for housing, which has driven up real estate prices in these cities. With the government's push for urbanisation and infrastructure development, tier 2 cities are expected to continue to grow, and this could lead to a real estate boom in 2023.
3. Commercial Real Estate
The real estate boom in Tier 2 cities is not limited to just the residential sector. The commercial sector is also witnessing significant growth in these cities. Tier 2 cities are emerging as new business hubs, attracting domestic and foreign investments. The commercial real estate sector in these cities is also witnessing significant growth due to favourable government policies, infrastructure development, and increased connectivity.
4. Government initiatives for infrastructural development
The government's focus on developing the infrastructure of Tier 2 cities is one of the major factors driving the real estate boom in these cities. Initiatives like the Smart Cities Mission, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), and the Pradhan Mantri Awas Yojana (PMAY) are contributing to the development of infrastructure, better connectivity, and affordable housing. The government's focus on infrastructure development is making Tier 2 cities a favourable investment destination for real estate developers and investors.
5. Government Policies
The Indian government's focus on the development of Tier 2 cities has led to the introduction of several policies aimed at encouraging real estate growth. For instance, the Real Estate Regulatory Authority (RERA) Act has led to increased transparency in the real estate sector, protecting the interests of both buyers and developers. The Goods and Services Tax (GST) has also positively impacted the real estate sector, making it easier for developers to obtain raw materials at a lower cost.
6. Improved and increasing Connectivity
The development of infrastructure and connectivity directly impacts the real estate market. Improved infrastructure and connectivity have increased demand for housing and commercial spaces in Tier 2 cities. The development of airports, highways, and other forms of transportation has made these cities accessible to people, leading to an increase in migration. This migration has resulted in a rise in demand for housing and commercial spaces in these cities.
7. Affordability Factor
The affordability factor is another significant contributor to real estate growth in Tier 2 cities. The property prices in these cities are comparatively lower than those in metropolitan cities, making them an attractive investment option. This, coupled with the government's focus on infrastructure development, is making Tier 2 cities a promising investment opportunity for real estate developers and investors.
8. Impact of COVID-19
The COVID-19 pandemic has seriously influenced the real estate sector in India. The first wave of the pandemic led to a slowdown in the real estate sector, with developers and buyers adopting a wait-and-watch approach. However, the sector has shown signs of recovery in the last few months, with a significant increase in demand for housing in Tier 2 cities. The pandemic also increased demand for commercial real estate in Tier 2 cities, with businesses looking to diversify their operations and move away from the congestion of metropolitan cities.
Final Thoughts
The real estate market in Tier 2 cities is witnessing significant growth, and 2023 could be the year of a real estate boom in these cities. Favourable government policies, infrastructure development, and increased connectivity are the major factors driving this growth. The growth is not limited to the residential sector but extends to the commercial sector. The affordability factor, along with the development of infrastructure, is making Tier 2 cities a promising investment opportunity for real estate developers and investors. The real estate boom in Tier 2 cities is likely to continue in the coming years, making it a favourable investment destination for investors.
