Tier 2 Cities; The Next big bet for Residential Investors

Home buyers have evolved, becoming more discerning, making informed decisions on their investments. An interesting trend that we have been witnessing over the last few years is a shift in consumer preference towards suburbs and smaller cities as locations to invest into residential real estate.

04 Sep 2018

By Anshuman Magazine

Tier 2 Cities; The Next big bet for Residential Investors
Residential real estate has seen a revolutionary change over the past couple of years. Implementation of focused policy reforms and strategic initiatives have resulted in greater transparency entering the market. Additionally, home buyers have evolved, becoming more discerning, making informed decisions on their investments. An interesting trend that we have been witnessing over the last few years is a shift in consumer preference towards suburbs and smaller cities as locations to invest into residential real estate. This has resulted in several tier 2 cities like Chandigarh, Kochi, Indore, Bhuwaneshwar, Nagpur coming into the purview of end-users. Thanks to the Smart Cities initiative by the government, many of these cities are witnessing large-scale social and physical infrastructure developments. This focus on infrastructure development and connectivity is bringing these cities into the purview of investors and end users alike who see its future potential.

There are several factors that work in favour of these cities emerging as residential hotspots. These include availability of land at cheaper costs, new infrastructure developments, and lower cost of living as compared to the tier 1 metros. Another key factor is the increasing economic activity in these cities. With more industries coming in, the city’s workforce is growing which has had a ripple effect on the housing market in these locations.  Attractive pricing and future growth potential also play a very important role for investors and end users looking at tier 2 markets.

Some of the tier 2 cities emerging as preferred markets for housing demand across India are as below:

  • Surat – The city is witnessing robust infrastructure development including the Mumbai-Ahmedabad bullet train, four-lane highways between Dakor-Savli, Vadodara-Dabhoi and Surat-Olpad-Bardoli, plan for INR 90,000-crore Mumbai-Surat tunnel road and construction of a modular cargo terminal.
  • Nagpur – The upcoming metro, high speed train with multiple connections, a 10-lane flyover and under-bridge, as well as the presence of an international airport are providing a boost to the housing market here. A few IT companies are also establishing a strong presence here leading to a ripple effect on residential real estate.
  • Coimbatore - Coimbatore is the second largest city (by area and population) in Tamil Nadu and the 16th largest urban agglomeration in India. It is also one of the fastest growing tier-II cities in India and a major industrial hub in Southern India. Selected as one of the cities for the Smart Cities mission project, it is witnessing an uptick in infrastructure development including proposed development of the metro in the city. Additionally, continuous economic activity and proximity to other key states like Kerala and Karnataka are providing a boost to housing.
  • Kochi – Also known as Cochin, Kochi is the financial, commercial and industrial capital of Kerala. It has been witnessing significant infrastructure upgradation such as metro, airport expansion and so on in recent years. More recently, Kochi has emerged as an alternative IT destination. With an aim to leverage the strong growth being witnessed in the IT sector, the
    State government has undertaken several initiatives to position Kochi as a cost-effective destination for Indian and global technology corporates. Besides NRI investment, this is the second major factor driving residential demand in the city.
  • Indore – Quality educational institutions including Madhya Pradesh’s first Indian Institute of Technology and the Indian Institute of Management means that the city has a constant demand for housing. Additionally, the planned infrastructure development including Indore-Ichhapur Road, Indore-Ahmedabad Road and the establishment of industrial regions like Kasarwardi, Relwa and Khajuri, etc are providing much scope for housing development here.


Moving forward, while the key metros in India will continue to witness demand, tier 2 cities are also gaining prominence for housing demand, especially in the affordable and mid-end segments.

Quality developments at competitive prices, lower cost of living as well as continuous infrastructure development is making these cities attractive. We believe there is a significant opportunity in these tier 2 towns and cities for India’s housing segment in the future.