Analysts believe that tier-2 cities will be the hotbed for future growth of the economy in general and the real estate market in particular While companies across industries have realised the advantages of work-from-home (WFH) in the backdrop of the Coronavirus pandemic, there has been a major shift of the workforce towards tier-2 cities, where the cost of living is less, the work and life balance is better and housing remains affordable. This has inspired Indian real estate developers, as well as state governments, to focus more on these high-potential and yet, neglected markets.
For example, in a tourist state like Goa, the government has been working in partnership with Software Technology Parks of India (STPI) to create the infrastructure to facilitate software exports and promote tech entrepreneurship in the region. As tech companies become location agnostic, options like Goa could attract more investment. Many other states are working to incentivise manufacturing in their key tier-II cities, as part of the Make in India programme. Analysts maintain that such cities, which may also be part of industrial corridors, could be hotbeds for future growth of the economy and the real estate market in particular.
What are tier-1, tier-2 and tier-3 cities?
Indian cities are classified as X (tier-1), Y (tier-2) and Z (tier-3) categories by the government, based on the population density. There are eight metropolitan tier-1 cities – Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Kolkata, Ahmedabad and Pune. On the other hand, 104 cities are categorised as tier-2, while the remaining cities fall under the tier-3 category.
Tier-1 cities are densely populated and have higher living expenses. There are major international airports, industries, top multi-specialty hospitals, education, and research institutes in these cities. Urban planners and economists believe that certain cities, officially classified as tier-2, are as good as any tier-1 city. The economic activities and lifestyle in the cities like Gurgaon, Noida, Vellore, Coimbatore, Kochi, Thiruvananthapuram, Patna, Rajkot, Goa, Lucknow and Jaipur could elevate these cities to the next level in the coming years.
How COVID-19 has changed buyers’ preferences?
Aditya Kushwaha, CEO and director, Axis Ecorp, points out that the COVID-19 pandemic has altered how we live, work, learn and play. The overall health, hygiene and wellness concerns during COVID-19, have significantly shifted the focus towards spacious homes, set amid verdant greenery, away from densely packed cities.
Further, riding on the wave of sustainability and prospective investment, the holiday homes/secondary housing segment has emerged as a sought-after option for buyers, whose jobs and lifestyle have remained unaffected in the wake of pay cuts. People’s preferences have shifted from the top metro cities to tier-2 and other tourist destinations, he says. “Investors believe that they can find better entry prices, flexibility and sizable returns in such locations,” he explains, attributing the shift to the concept of remote working.