Real Estate Developers Expanding Horizons: A Shift to Tier 2 and 3 Cities
Indian real estate developers are broadening their horizons beyond the bustling metros and major cities. According to data spanning from January 2022 to October 2023, developers have acquired approximately 3,294 acres of land nationwide. Surprisingly, 44.4% of these transactions have taken place in Tier 2 and 3 cities, totaling 1,461 acres across 17 separate deals, as reported by JLL, a leading real estate and investment management firm.
The Emerging Trend in Northern and Western India
This trend is notably significant in the northern and western regions of India. Cities like Panipat, Ludhiana, Nagpur, and Panchkula collectively account for 75% of the total land acquired during this period.
Embracing Tier 2 and 3 Cities
Real estate firms are strategically venturing into Tier 2 and 3 cities to initiate new projects. The data underscores the success of established developers in securing multiple land deals to meet the growing demand from customers with increased purchasing power.
Buyers in these cities are increasingly seeking quality residential properties, thereby driving demand for such projects.
Success Stories and Market Penetration
For example, DLF’s maiden project in Panipat witnessed a sold-out status within just an hour of its launch. Similarly, Godrej Properties experienced the rapid sell-out of phase 1 of its plotted development project in Sonipat within two days of its launch. In the southern region, plotted residential projects have been introduced in cities like Ambur, Mahabalipuram, Coimbatore, Trichy, and Mysuru.
Building Future Supply Pipelines
Buoyed by the impressive residential sales in emerging cities, developers are proactively acquiring land to establish future supply pipelines. Companies such as Godrej Properties, M3M, Eldeco Group, and Omaxe Group have either entered or expanded their footprint in these burgeoning markets through recent land acquisitions.
Samantak Das, Chief Economist and Head of Research and REIS, India at JLL, emphasizes the importance of proper infrastructure development in Tier 2 and Tier 3 cities. He highlights the potential attractiveness of these cities due to comparatively lower home prices and existing organic demand from residents.
Snapshot of Land Transactions in Tier 2 and 3 Cities
It’s noteworthy that a significant majority, 91.6% (1,339 acres), of the acquired land is earmarked for prospective residential developments, with a strong focus on plotted residential units.
Tailoring Offerings to Preferences
Developers are tailoring their offerings to meet local preferences, with a particular emphasis on low-rise and plotted developments. Approximately 1,015 acres have been allocated for plotted developments, with a total value exceeding ₹3,163 crore.
Sen, a representative of the real estate industry, underscores the appeal of plotted developments, citing their comprehensive infrastructure including parks and shopping centers. He notes a shift in preferences from traditional self-built houses, often shared among joint families, to independent apartment living.
In conclusion, the surge in land acquisitions and development activities in Tier 2 and 3 cities signifies a significant shift in the real estate landscape of India. With developers actively responding to evolving consumer demands and preferences, these emerging cities are poised for substantial growth and development in the coming years.
