Economic diversification, rising consumer demand, and pandemic-accelerated reverse migration have driven significant growth in the real estate markets of Tier-2 cities, closing the gap with Tier-1 counterparts, according to Housing.com’s ‘The Bharat in India’ report.
These cities’ growing economic potential is attracting more residents, a trend that has gained momentum post-pandemic. This economic dynamism has had a multiplier effect on the real estate market, especially in retail, warehousing, and residential segments. National and international brands’ increased interest has led to the development of high-street areas and premium retail spaces. For instance, Kochi in Kerala boasts the largest mall in India, showcasing the evolving retail landscape. Additionally, rising e-commerce activity has driven companies to expand in these cities, exemplified by Amazon leasing approximately 6.1 lakh sq ft for a fulfillment center in Lucknow, its largest in India. The development of industrial corridors and enhanced airport cargo facilities have also fueled growth in the warehousing sector.
Property markets in Tier-2 cities have seen heightened activity, with Housing.com’s Property Buy Index showing these cities trending above the top eight metros. Dhruv Agarwala, Group CEO of Housing.com, stated, “The real estate narrative in India is evolving, with Tier-2 cities like Kochi, Jaipur, Goa, and Chandigarh Tri-city emerging as new growth powerhouses. Our Property Buy Index reveals Tier-2 cities surpassing the top eight metros by 88 points, underscoring their increasing prominence and service sector potential.”
Key highlights from the report include:
- Significant double-digit capital value appreciation of 10-15% year-on-year in key micro-markets of Tier-2 cities, narrowing the price gap with top metros.
- Capital values in premium localities of Goa, Chandigarh Tri-city, and Kochi are nearly on par with key markets in Delhi-NCR and the Mumbai Metropolitan Region.
- Robust rental markets in Tier-2 cities, with yields as high as 8% in Goa, attracting investments from high-net-worth individuals and professionals.
- Homebuyer preferences shifting towards high-rise apartments and lifestyle amenities like clubhouses and sports facilities.
- Online property searches in the INR 1-2 crore segment have surged 61%, while the above INR 2 crore bracket has grown 121%.
Ankita Sood, Head of Research at Housing.com, emphasized that Tier-2 cities are experiencing phenomenal growth. “The Tier IIs registered an 88 point lead over the metros on our Property Buy Index, pushing prices upwards by 10-15% in key micro-markets and bringing cities like Kochi, Goa, and Lucknow on par with metro property prices.”
Overall, the report highlights the increasing attractiveness of Tier-2 cities for investors, developers, and homebuyers, indicating their rising importance in India’s real estate landscape.
