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      Tier-II Indian cities emerge as significant real estate development engines

      • 5 min read
      • Last Modified Date: February 2, 2023
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      According to a report, there has been an increase in the absorption and supply of quality residential homes across price ranges in Ahmedabad, Vadodara, Nashik, Gandhi Nagar, and Jaipur.

      According to a recent analysis produced by real estate data analytics and consultancy firm PropEquity, Ahmedabad, Vadodara, Nashik, Gandhi Nagar, and Jaipur are the top tier-II cities in terms of residential property market growth. According to the research, the surge has been fueled by rising urbanization, industrialization, and the expansion of the IT industry.

      According to the report, titled ‘Tier-II: Residential Overview,’ there has been a boom in the absorption and supply of quality residential properties in these locations across price groups. From FY18 to FY22, the report tracked the performance of the residential segment in various tier-II cities.

      Tier-2 cities’ real estate activity is rapidly catching up to that of tier-1 cities. Interestingly, Ahmedabad’s residential real estate market size of Rs 83,390 crore outstripped that of major tier-1 cities like as Chennai and Kolkata, which had market sizes of Rs 52,554 crore and Rs 38,440 crore, respectively, at the end of FY22. It is also worth noting that the market share of Tier-I cities has been almost four times that of Tier-II cities over the previous five fiscal years.

      Following the Covid lockdowns, tier-2 cities have seen a healthy pace of employment growth, and many IT and other industry businesses are encouraging workers to work from home for at least the next several years. This has resulted in significant interest in tier-2 housing developments due to their appealing price and potential for better returns on investments.

      • Ahmedabad: Housing sales in Ahmedabad totaled 39,046 units in fiscal 2021-22, a 26% increase over the fiscal year 2020-2021. In comparison to fiscal 2017-18, the city had a 32% increase. Ahmedabad’s housing supply amounted to 39,195 units in the fiscal year 2021-22, up 14% year on year (YoY). It is owed to increased urbanization, industrialization, and the rise of the IT industry. After FY22, the unsold stock of dwellings was at 62,047 units, about the same as in FY21. At the present pace of housing absorption, the inventory overhang will take around 24 months to remove.

      • Vadodara: Home sales in the No. 2 ranked city increased by 25% year on year to 17,285 units in FY22. The increase was 20% as compared to the previous fiscal year. In fiscal 2021-22, the supply of new dwellings was at 15,046 units, a 9% increase over the previous fiscal year. At the end of FY22, Vadodara’s housing stock stood at 27,070 units, an 8% decrease year on year. According to the PropEquity study, it will take 19 months to clear at the present rate of sales.

      • Nashik: Sales in the third-ranked Nashik were 10,806 units in fiscal 2021-22, increasing 15% year on year. In the fiscal year 2021-22, the new housing supply in Nashik reached 13,037 units, an increase of 68 percent over the previous year. The city’s housing stock was 15,837 units at the end of FY22, rising 17% year on year. At the present rate of sales, it will take 17 months to clear.

      • Gandhinagar: In FY22, sales in the fourth-ranked Gandhi Nagar increased by 10% year on year to 7,650 units. In FY22, the new supply of dwellings in Gandhi Nagar was 6,361 units, a 30% decrease year on year.
      • Jaipur: Jaipur, which placed fifth, witnessed sales of 7,676 units in FY22, a 42 percent increase over FY21. In the fiscal year 2021-22, the new housing supply was at 7,022 units, a tremendous rise of 78% year on year. Jaipur’s housing stock was at 14,529 units at the end of fiscal 2021-22, a 4% decrease year on year. According to the PropEquity analysis, it will take 23 months to clear at the present rate of sales.

      Assetmonk is a well-known portal in India that provides real estate investment opportunities in Chennai, Hyderabad, and Bangalore. It provides feasible CRE investment alternatives via fractional ownership and crowdfunding. The IRRs vary from 14 to 21%. Our products, however, are grouped into categories to meet different economic levels of investors. The three categories are Growth, Growth Plus, and Yield.

      Tier-II Indian cities emerge as significant real estate development engines FAQs

      Tier II cities are currently establishing their real estate markets. These cities are often on the rise, and many businesses have invested in them, but they have not yet hit their peak. Real estate is often affordable in this area; but, if expansion continues, prices will climb.

      Tier I cities have an established and developed real estate market. These cities are often well-developed, with desired schools, amenities, and enterprises. Real estate in these cities is the most costly. Tier II cities are currently establishing their real estate markets.

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