New Delhi: While the entire world is still battling the coronavirus epidemic, most sectors including the real estate have suffered a major setback. The real estate business, which contributes 7 percent to the country’s GDP, has seen significant changes in buyers’ behaviour due to lockdown. The major changes has emerged in the preference of people for properties in Tier 2 and 3 cities.
The change is driven by various factors, including affordability of the property, priority to own house rather than rented one, number of projects from reputed developers on the outskirts of major cities, decline in home loan interest rates, work from home culture and desire for clean and green environment than cities.
The affordability is primary factor that is making people tilt towards Tier 2 and 3 cities. For an average middleclass family, building their home in metros with high cost of living is like a never ending dream. Tier 2 and 3 cities are more favorable in terms of low cost of land, residential units and retail projects for more affordable pricing for rentals. Compared to Tier 1 cities, people are able to afford living in larger houses in Tier 2 and 3 cities.
The real estate markets has took a upward turn in non-metro and non-prime metro cities because of government’s programmes for affordable housing. The repo rate cut announced by the RBI has reduced the interest rates of home loans. The relief package allotted to HFC is another step taken for the upliftment of the real estate sector in small markets. Another factor that has increased the trend for small towns is that infrastructure and lifestyle gaps are shrinking, businesses have grown, attracting migrant professionals, creating a new culture that is more multicultural. Eventually it is bringing people back from metros to cities.
The government has initiated several measures to promote the MSME sector in small towns, which have contributed to the industrialization and establishment of manufacturing centers. Tier 2 and 3 cities are hosting many industries such as engineering, textiles, pharma and capital goods as small cities have low-cost labor, low fixed cost, availability of resources and high disposable income families.
Reverse migration is encouraging investors to move to these smaller cities, where demand for commercial space, including office and retail space, can give them good returns. Until the international travel is secured, the overseas Indians returning to India will also stay here.
The ‘Vocal for Local’ campaign by the government will further promote industries and manufacturing plants in small towns. This will help them in expanding their supply chain, thus directly affecting their growth. The need for better living and entertainment will be fulfilled and the level of business will increase. Due to all these reasons, a new chapter in India’s real estate growth will begin after the coronavirus era in Tier 2 and 3 cities.