India’s real estate sector is currently experiencing a major shift due to the country’s rapid urbanization in Tier II cities. The urbanization rate in India has surged from 32% in 2013 to approximately 36% in 2023.
This transformation is propelling the real estate industry towards new horizons, particularly in cities that exhibit remarkable growth potential. The Confederation of Real Estate Developers’ Associations of India (CREDAI) and Cushman & Wakefield jointly released a report titled “India’s Next 10 Emerging Markets: Engines for Future Growth of Commercial Real Estate.”
This report has identified 17 Tier II cities across India with substantial potential for real estate development, organized retail penetration, and mature residential markets. Among these, Bhubaneswar, Coimbatore, Indore, Jaipur, Kochi, Lucknow, Nagpur, Surat, Thiruvananthapuram, and Visakhapatnam are the ten emerging cities with the highest potential for future growth.
Why Tier II Cities Are Thriving
The growth in India’s tier-II cities is not a coincidence; it’s driven by multiple factors. Rising incomes and increased consumption levels have turned these Tier II cities into magnets for retail investments.
Luxury realtor and social media content creator with over 245k followers on Instagram, Snehil Yadav says “Large Grade-A malls and prominent high streets are emerging, transforming these tier-II cities into major consumption hubs. The residential sector in many of these cities has also experienced significant growth, and housing affordability remains favorable.”
Key Selection Parameters
The selection of these emerging Tier II cities was based on a comprehensive evaluation of several key parameters:
Population: The report considered the population size as a significant factor in identifying potential cities for real estate growth.
Economic Prowess: The economic strength of a city, indicated by GDP per capita, played a crucial role in the selection process.
Tertiary Education Enrolment: The presence of educational institutions and the enrollment of students were considered, as they are important factors for corporate decisions on office locations for Tier II cities.
Ease of Living: Cities with better living conditions and quality of life were favored.
Infrastructure and Connectivity: These were identified as essential drivers of commercial activity in today’s world.
Metro Development Index: The availability and planned expansion of metro routes were also assessed, as they greatly impact connectivity and accessibility.
Population Growth: The growth in population over the last decade was analyzed to predict future demand for real estate.
House Prices: House prices were examined to evaluate affordability across Grade-A projects.
Real Estate Growth and the Future of India
India is currently one of the world’s fastest-growing major economies, with ambitious plans to reach a GDP of $5 trillion by FY2026-27. Achieving this goal requires accelerated economic growth and the development of more metropolitan areas. It is India’s tier-II cities that will play a significant role in this nation-building narrative.
The report not only benefits corporate occupiers exploring new locations beyond the key eight real estate markets but also offers insights to developers regarding the opportunities within their own domains. As India continues its extraordinary economic journey and experiences higher urbanization rates, emerging Tier II cities will be key drivers of the future growth of the commercial real estate market.
The Ten Emerging Cities
Bhubaneswar: This rapidly growing city in Odisha is attracting attention with its booming infrastructure and economic potential.
Coimbatore: Known as the “Manchester of South India,” Coimbatore boasts a diverse economy and is an emerging real estate market.
Indore: The largest city in Madhya Pradesh is a center of commerce and culture, presenting promising opportunities for real estate development.
Jaipur: The Pink City is experiencing robust growth in commercial real estate, driven by its rich history and contemporary development.
Kochi: The port city is witnessing significant investment in real estate, particularly in the commercial sector.
Lucknow: With its strategic location, Lucknow is becoming a real estate hotspot for both residential and commercial projects.
Nagpur: Known as the “Orange City,” Nagpur is transitioning into a prime real estate destination with improved infrastructure.
Surat: This Gujarat city’s strong economic performance and growing population have boosted its real estate sector.
Thiruvananthapuram: The capital of Kerala is attracting investments due to its expanding economy and quality of life.
Visakhapatnam: The largest city in Andhra Pradesh is a rising star in the real estate sector, thanks to its development potential.
As India continues to undergo rapid urbanization, the real estate industry is poised for significant growth in emerging Tier II cities. These tier-II cities offer opportunities for investors, developers, and businesses looking to tap into India’s burgeoning commercial and residential real estate markets.
With a blend of economic potential, population growth, and quality of life, these Tier II cities are set to shape the future of India’s real estate sector. In the journey to a $5 trillion economy, these emerging markets will play a pivotal role in fueling the nation’s development narrative. The potential of these ten emerging cities is a beacon of hope for a brighter future in India’s real estate landscape.