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Tier 2 Cities;

Tier 2 Cities: The Future of Real Estate

In the past, the Indian economy was chiefly characterised by its 8 economic powerhouses, its metropolitan cities, also known as Tier-1 cities. However, in the contemporary framework, these cities are plagued with high living costs, enormous populations, and an infrastructure weighed down with a demand that highly exceeds its capacity. On top of everything else the pandemic has ushered in an era where wellness and hygiene are the driving forces, a need that the uber-saturated, densely populated Tier-1 cities are incapacitated to fulfil

These events have provided the ideal concoction for Tier-2 cities to emerge as a beacon of hope for both real estate developers and home buyers. These cities today are on par with the Tier-1 cities when it comes to the paradigms of growth, infrastructure, amenities, and quality of life. In the wake of the adversity of the pandemic, these cities have managed to ingeniously blossom as the growth engines of the country.

In light of the massive infrastructural strides bolstered by the government’s programmes and initiatives prioritising the development of Tier-2 cities, they have become a fertile ground for a robust housing market complemented by burgeoning industrial and commercial corridors.

An astute option for commercial spaces:
The pandemic was a watershed moment for Tier-2 cities as it led to an exhaustive reshaping of the commercial real estate spaces in the country. This evolution in the industry with a normative shift to a hybrid or work-from-home culture has led to a rise in newfangled commercial assets such as coworking spaces. Furthermore, with the recent return to workspaces, employees are more than ever clamouring for offices that deem workplace wellness as a priority.  There is a rising desire for workspaces that are cognizant of the desire for offices with expansive open spaces and a plethora of amenities.

Since the cost of conducting business per sq. ft is substantially reduced in Tier-2 cities owing to the relatively low property prices, it is much more sustainable for the organisations to satisfy these demands in such locales. It is precisely for this region that the Tier-2 cities have developed into an investment haven for commercial real estate connoisseurs. From IT hubs to warehousing and logistics centres to e-commerce hubs, the past years have witnessed the genesis of numerous commercial investments in these cities, with Grade-A developers moving in to explore the heretofore untapped market.

One of the major reasons for the maturation of these cities into the cradle of commercial growth is the series of government initiatives and programmes. Aimed to develop core infrastructure in Tier-2 cities, programmes such as Atal Mission for Rejuvenation and Transformation (AMRUT) and Smart Cities Mission have contributed tremendously to the metamorphosis of Tier-2 cities. As opposed to the metropolitan cities with their bottlenecked traffic junctions, these cities are relatively less populated, and their progressive transit systems ensure a hassle-free and easy commute to the workplace.

A hotbed of residential catchment:
There is a mutually symbiotic relationship between the emergence of commercial corridors and the concomitant budding of residential spaces in their vicinity. This trend is apparent in Tier-2 cities as well. With the establishment of national and multinational corporations in these micro markets, there has been a rise in the demand for residential spaces in these locales.

Additionally, as a corollary to the pandemic, the real estate industry witnessed a heightening requirement for spacious, open living spaces set amidst verdant greenery. This was because the enforced work-from-home or hybrid methodology of work completely transformed the definition of residential spaces into a holistic space that can serve the purpose of work, live and play simultaneously.  The Tier-2 cities with their relatively low entry prices and robust social infrastructure can successfully accommodate this growing demand of the modern working class.

Propitious investment destination for NRIs:
The latter half of this decade beheld international turmoil, with the global economic meltdown, the pandemic, and the disarray of the international supply chains. The Indian economy, on the other hand, shone brightly as a symbol of hope with steady economic growth and socio-political stability.

This has led to the country, particularly the Tier-2 cities, triumphing as an opportune real estate investment location for NRIs. With the falling value of the Indian Rupee to the US Dollar, the increased transparency of the regulations regarding buying and selling of real estate spaces owing to RERA, and the stability of real estate assets as an appreciating investment as compared to other turbulent financial assets, has led to a historic rise in investments by NRIS.

Often hailing from Tier-2 cities, these expats now have ceased viewing their hometowns as only the destination for vacation or retirement homes. Rather, with work-from-home increasingly becoming the new standard, NRIs are looking to invest in residential spaces in these cities owing to the low circle rates for luxurious living spaces, with strong infrastructural and transit support.

Final Thoughts:
The real estate sector is presently countenancing a massive structural change due to the rapidly shifting market dynamics. Where erstwhile, the metropolitan cities accounted for an overwhelming proportion of investments by the tycoons of the real estate sector, there has been a noticeable upswing in investments in Tier-2 cities. Owing to the saturation of the market in Tier 1 cities, and consequently its surmounting prices, investors are now seeking to diversify their portfolios by entering this new market with humongous untapped potential.

The megacity of Gurugram for instance is the perfect exemplification of a Tier-2 city that has developed into a treasure trove of investment opportunities for discerning investors. With its stupendous IT/ITes and business hubs, marvellous infrastructural makeup, and a vast array of facilities, the Millenium City has overarchingly overhauled the facsimile of Tier-2 cities, providing a roadmap for the rest to follow.

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