Residential, retail activities gaining momentum in Tier-II cities in India

V Nagarajan

According to UN’s World Cities Report 2022, more than 37 per cent of India’s population would reside in urban centres by 2025, and this number is likely to touch 43 per cent by 2035.

The fact remains that the growing urban sprawl would spread beyond tier-I cities, so that tier-II cities take on the mantle of the future.

 Recognising this need, the government started undertaking measures to plug in the prevailing infrastructure/business gaps that would boost the development of these cities.

The residential and consequently, retail activity also has been rising to cater to the growing demand in these cities. CBRE’s report, Tier-II Cities – Coming of Age, is an attempt at highlighting the advances of these newer centres of power in terms of real estate opportunities and what drives their strengths.

India’s tier-II cities are fast emerging as the next growth frontier for the office sector.

As of H1 2022, Ahmedabad, Kochi, Thiruvananthapuram and Chandigarh had an office stock of more than 7.5 million sqft each.

Also, most tier-II cities have attracted a high number of flex players over the past few years.

Innovation and resilient infrastructure are the key drivers of economic development.

The scores for assessment in 2021 indicated that cities such as Ahmedabad, Bhubaneswar, Visakhapatnam and Coimbatore are front runners.

A few cities are catching up on ‘Decent work and economic growth’ indicating that heightened focus on job creation would be required in the coming years.

There are multiple parameters on which quality of life depends.

To get a more holistic view of this element in key tier-II cities, three key determinants of quality of life in a city: cost of living, health and wellbeing and education quality.

CBRE’s cost of living index-2022 indicates cities such as Kochi and Coimbatore are much more affordable than others. Further, on the other two fronts, most cities either emerged as front runners or performers.

Sustainability and climate action have globally become social mores in business circles. Thus, it was important that the cities were assessed on this front.

Cities such as Coimbatore, Visakhapatnam, Thiruvananthapuram, Indore and Chandigarh to be relatively more sustainable.

India’s transition into an urban society would be driven by the continued growth of its tier-II cities, in addition to other factors. It is believed that harnessing their economic and development potential is vital for them to take on the mantle of the future.

Tier-II cities are poised to be the new growth sectors in India in the coming years, driven by their progress in real estate landscape, operating environment, quality of life and sustainability.

Several prominent developers such as DLF, Godrej Properties, Mahindra Lifespaces, Brigade, Lulu, Prestige, Embassy, L&T etc have a presence across these cities so as to cater to domestic and global occupiers.

The various business clusters in tier-II cities offer a mix of non-SEZ and SEZ establishments, with average quoted rentals ranging from as low as Rs30-40 per sqft/month to about Rs 60-80 per sqft/month.

Most cities have also recorded a growing presence of flexible space operators, industrial hubs and malls.

The widening economic base and access to skilled talent pool are prime influencing factors for occupiers to consider expanding in tier-II cities.

There is also rising investor interest over recent years in these cities, with various plans announced by domestic and global firms to establish their footprint in these markets.

Quality of life in these cities is well supported by relatively affordable cost of living as compared to tier-I cities, along with a strong presence of healthcare facilities and educational institutions.

I am a partner in a firm in India which took ECB loan but defaulted in payment. What are the implications over the asset security in India? Dharmadev, Sharjah.
In the event of failure in repayment of ECB, the authorised bank may permit the overseas lender or security trustee to sell the immovable property on which the said loan has been secured only to a person resident in India and to repatriate the sale proceeds towards outstanding dues in respect of the said loan and not any other loan.

Can an NRI spouse buy property in India jointly with his NRI partner? Ritesh, Dubai.
Yes. Consideration for transfer should be out of funds received in India through banking channels. The marriage should have been registered and subsisted for a continuous period of not less than two years immediately preceding the acquisition of property.