Rise of the Tier III and IV cities

Widespread economic activity and rampant urbanisation has led to the transformation of smaller towns and cities into vibrant growth centres, says The Emerging Growth Centres-II, Q4 2007 a research report prepared by Knight Frank India Research. The report focuses on tier III and IV that are emerging in India. The tier III and IV cities have been demarcated based on per capita income levels, infrastructure, and population base.

These cities are state capitals and other commercially important cities that are experiencing improving quality of life, infrastructure thrust, and positive economic sentiments. The improving economic conditions have impacted the demand for residential, commercial, entertainment and hospitality sectors and this has led to considerable alteration of the real estate landscape of these cities. The change has attracted many national as well as foreign developers to these small towns to offer lifestyle-oriented services and products. While the residential sectors in these cities are on an upswing, most of the smaller towns are yet to have an organised or defined office and retail market.

United Nations Population Fund (UNFPA) estimates that India is getting urbanised at a faster rate than the rest of the world and by 2030 about 41% of the country’s population will be living in urban areas.

Quite evidently, several cities with population of less than or equal to 1 million are expected to emerge are major real estate hubs over the next few years.

However, the accelerated pace of urbanisation has already begun to strain the capacity of the Tier I and II cities (currently having a population of more than 1 million), thereby leading to a spill-over effect on the Tier III and IV cities. These smaller cities, which present tremendous potential for economic and social development, now need to gear up to provide for increasing population by expanding their infrastructure and housing capacities correspondingly. In anticipation of the pent-up demand, a number of prominent developers have already launched township projects in various smaller cities.

The Knight Frank India Research report charts the growth scenario in 10 upcoming cities of India. Following are some of them:

Thiruvanantapuram
A major milestone in the city’s recent history was the establishment of Technopark in 1995. Technopark has developed into one of the largest IT Parks in India. The real estate market is primarily driven by the IT/ITES sector. Prime residential areas of Kowdiar Chowk, Jawahar Nagar, Velayambalam, Sasthamangalam and Medical College Road have many projects under construction.
Most of these projects are redevelopments of existing bungalows into multi storied apartments. Expansive residential complexes are also mushrooming on Kovalam-Kazhakuttam bypass to meet the increasing demand generated by new jobs at Technopark. Knight Frank research estimates that 4 mn sq ft of residential space will enter the Thiruvananthapuram market by end of 2009-10.

Mangalore
Mangalore has the presence of some of the industry leaders including Infosys, ONGC, MRPL, MCF, BASF, KIOCL, Suzlon, Nagarjuna Power and the GMR group. Some of the factors contributing to the growth are the proposed Coastal Special Economic Zone (C-SEZ) where ONGC is to invest Rs 250 billion in the next five years and the development of 3 IT-SEZs at Mudipu, Ganjimutt, and Thumbe.

Amritsar
The town has at least 27 new upcoming residential projects along the Airport Road, GT Road, and on Amritsar Bypass Road. A few are also being planned on the Loharaka Road. Real estate market in New Amritsar (GT Road) is in an upswing and is primarily end-user driven. Despite the size of the market, a few projects are offering service apartments and luxury apartments.

Dehradun
The major residential projects are being developed towards south-east and south-west of Dehradun city. About 14 residential developments, which include two integrated townships, are coming up. Service and fully furnished apartments are catching up here. Currently, there is a shortage of residential options and this has resulted in appreciation of rental values in the city.

Rudrapur
The town has attracted investors from the NCR and other neighbouring states. Majority of the apartments in the upcoming projects have been pre-committed by the business houses. The current supply is extremely inadequate for meeting the current working population. The current market is therefore investor dominated.

Nashik
With nearly 2,000 students passing out of Nashik’s engineering and management institutes every year, the government is looking at using this enormous resource to attract the IT industry to the city. Nashik with its good human resource pool and low real estate cost is picturing in the radar of IT/ITES companies looking at diversifying in smaller towns and cities.

Haridwar-Rishikesh
Presently majority of the development in Haridwar is taking place in the form of residential projects in the outskirts of the city along the Delhi-Haridwar highway (NH-58) and NH-73 as well as in the vicinity of the SIDCUL area. A number of residential projects are coming up near Baba Ramdev’s Patanjali Nagar, located on the way to Roorkee on NH-58. Like Haridwar, Rishikesh too does not have a commercial real estate market. Of late, an increased demand for serviced apartments has been witnessed in Rishikesh, which can primarily be attributed to the domestic and international tourists in the region.

Bhopal
It has been observed that, while the neighbouring market of Indore largely consists of plotted land, in Bhopal the market is predominantly of built structures or developed plots, mostly bungalows. This lends sustainability to the real estate market as developed plots can be marketed faster, unlike plotted land which involves a long gestation period.

(Express Estates.)