The Indian real estate market is witnessing a sea change as Tier-2 cities emerge as lucrative investment options. While metro cities like Delhi, Mumbai, Bengaluru, and Chennai once dominated the property market, smaller cities are now gaining popularity among home-buyers, investors and developers.

Better infrastructure, affordable houses, increasing job opportunities and change in lifestyle choices are leading to this rise in popularity of these cities. Cities such as Jaipur, Lucknow, Indore, Chandigarh, Coimbatore, Bhubaneswar and Surat are growing into strong real estate markets with immense future potential.

Affordable Property Rates

The key factor driving the Tier-2 city growth is affordable property prices. Property rates in the metro cities are growing beyond the affordability level of the middle class and young professionals.On the other hand, spacious and equipped houses, modern apartments and plush residential projects are available at the Tier-2 cities at a much lower cost compared to the metro cities. One can find even a spacious apartment or a house in a Tier-2 city at a fraction of the price it would cost in a metro city.Furthermore, the lower acquisition costs benefit the investor by providing a chance of higher returns over a period of time since property rates in these developing cities keep on increasing.

Improvement in Infrastructure Development

• A major contributor to the development of Tier-2 cities is increased government investment in infrastructure development. New highways, metro projects, airports, railway lines and up gradation plans of many cities are helping cities become more livable and develop a strong real estate market.
• A good connectivity means these cities become suitable for industries and businesses. The improved infrastructure leads to an overall better quality of life for residents. Roads are well constructed and the city is a great place for good public transport.
• The Smart Cities Mission launched by the government of India is aimed at modernization of few cities under a particular project. This mission has indeed sped up development and reduced the gap between Tier-1 and Tier-2 cities on a lot of fronts.

Growth in the IT and Business Sectors

The growth in the business sector including the IT sector and start-ups has made companies move away from metropolitan cities. The costs associated with operations in metro cities are increasing with the result that it is profitable for them to setup their units in Tier-2 cities. They get more benefits by setting up in Tier-2 cities than any Tier-1 cities as here it is cheap to acquire land and manpower.

The growth in business sector further adds to employment opportunities in Tier-2 cities thereby increasing the demand for residential properties in these cities. The growth in the office space market has taken over certainTier-1 and Tier-2 cities like Pune, Ahmedabad, Kochi and Indore and also developed a major market in IT parks.

Better Quality of Life

The middle class and young professionals looking for a better quality of life rather than living in a metropolitan city that comes with too much crowd and tension prefer moving to Tier-2 cities. Traffic is much lower in Tier-2 cities, so is the pollution. People want a more relaxed lifestyle with a better neighbourhood.

The cities now offer modern residential houses, malls, hospitals and schools as compared to Tier-1 cities and are attractive to the consumers who prefer to have a more relaxed lifestyle. Rise of the work-from-home model of life has only made a bigger case for moving out from metropolitan cities where property costs are too high.

Rising Demand for Rental Property

As the migration to Tier-2 cities is increasing, the demand for rented homes has also begun to rise in these cities. Students, professionals, and even newly graduated individuals who are newly starting their careers will need to rent an apartment near their place of work or study. This offers a promising avenue to real estate investors willing to invest in rental property and expect reasonable returns, with the demand slated to be on a consistent rise with growing migration and falling house buying opportunities in the metro cities.

Government Policies Supporting the Growth

Government projects like the PMAY (Pradhan Mantri Awas Yojana) and schemes that offer better tax rebates to both home-buyers and developers, together with government expenditure in developing infrastructure at Tier-2 cities are helping the growth of real estate market. Government efforts to increase investment in the development of metro and tier 2 cities would have a substantial long term effect on the real estate market in these cities. The low interest rate offered on home loans would make these cities a preferred choice for both the end-users and the investors.

Strong Future Investment Potential

The Tier-2 cities are at the beginning of the real estate market and so is still not fully developed as compared to metropolises, giving way for a large number of opportunities to investors for long term returns. As and when these cities develop and improve its economic status, property prices are only likely to grow. Investing at the right time in the right city at the right kind of property is what is required. Projects now include smart features and more amenities to match the taste of modern buyers.

Conclusion

TheTier-2 cities are transforming into real estate hotspots due to affordability, upgraded infrastructure, growing business potential and better quality of life. These developing urban areas present home-buyers and investors with outstanding opportunities for long term value appreciation. The continuing urbanization and increasing economic power of India are set to boost the prominence of Tier-2 cities in the country’s real estate panorama, establishing them as some of the best investment destinations for the years ahead.