While there was a time when the real estate industry of India was mainly driven by the metro cities like Mumbai, Chennai, and NCR, unaffordable property prices, high construction related costs, scarcity of land resources, and constantly declining demands are forcing both property investors and developers to move to Tier-II cities instead.

 

In fact, in the last decade, Tier-II cities have witnessed a much better price appreciation as compared to metros in terms of property investment.  According to the NHB residex, while the property prices grew in Tier-II cities like Ahmedabad, Nashik, and Chandigarh, property prices actually declined in cities like Chennai, Mumbai, and Gurugram. 

 

Here are five reasons why Tier-II cities are worth investing in property:

 

1- Affordable market

As compared to the big metro cities, Tier-II cities are way more affordable right now with more scope for property appreciation. The lower land costs in Tier-II cities has also lead to availability of affordable rentals and residential units.

 

With high mid-income population base, these cities are now the epicentre of untapped residential market demand. 

 

Banks are also focusing on Tier-II cities to make it easier for people to get home loans for their dream house. ICICI Bank has already announced that it plans to grow its home book by over 33 percent by expanding into Tier-II cities. 

 

2- Low cost of living

Whether people are looking to settle down or buy a retirement home, most of them choose to invest in Tier-II cities for one simple reason -- The cost of living is comparatively lesser than metro cities. 

 

Not to mention, the improved infrastructure, cleaner environment, lesser traffic, and better healthcare facilities make Tier-II cities a great place to move.

 

For instance, just three hours away from Mumbai, Pune has become a retirement hub for people from Mumbai because of its high standard of living and improved facilities. Now, even working people couples in their early 30’s are also readily moving to Pune from Mumbai to start a family and have a better work life balance.

 

3- New job opportunities 

 

Well established enterprises from textile, IT, manufacturing and many more industries are consistently looking for skilled labour and land at cheaper rates. Tier-II cities are able to offer them just that with low fixed costs. 

 

While cities like Coimbatore, Bhiwandi, and Jamshedpur have become ecommerce hubs, Vadodara and Surat are progressing quickly in the industrial sector. Similarly Jaipur is leading in terms of service sector investments and Vizag has now become an attractive location for heavy manufacturing and mining companies due to its ports. 

 

 

4- Continuous infrastructure development 

 

The smart city plan by the government has taken in account many Tier-II cities across the country including Bhubaneshwar, Visakhapatnam, Pune, Indore, and Coimbatore which has in turn led to rapid infrastructure development. 

 

Metro services have already been launched in Kochi, Jaipur and Lucknow and the development is underway in Pune and Ahmedabad. Most Tier-II cities also have newly built super corridors and well established airports making them easily connected to the rest of the country.

 

All of these proposed projects have lead to better connectivity, distribution network, power transmission, and other urban services. For end users with restricted budgets, these cities can prove to be really good investments considering the potential of property appreciation.  

 

5- More investments by retail and entertainment brands 

While the people in Tier-II cities are inclined towards spending more, smaller cities are actually underserved markets when it comes to retail and entertainment experiences. That is exactly why, many retailers and entertainment brands are now actively looking to invest in Tier-II cities in order to explore new opportunities and expand their customer base.

 

Phoenix mills, the retail development giant behind Phoenix malls in Mumbai has already a established mall in Pune and they also have two malls under construction in Indore and Lucknow. 

 

Retail companies like H&M, Zara, Future Retail, and Reliance Digital have also started expanding their presence in smaller cities because of lower land rates, better warehousing spaces, and optimum transport network. 

 

 

SILA is a leading facility management company in mumbai that looks after various real estate services like project management, real estate advisory, real estate development, and home interior design.