The Tier 1 cities in India, which are basically the top 7 cities, have been known for being prominent residential hubs for quite a while now. However, a new trend is starting to emerge, which is the growth of real estate in Tier 2 and 3 cities. Although not as high in demand as in Tier 1 cities, properties in Tier 2 and 3 cities were already starting to show rising demand a few months back. This has been spurred further by reverse migration triggered by the COVID-19 pandemic.
The main reason why people used to prefer the metro cities was that these cities used to offer alluring commercial prospects and great social infrastructure. However, over the years the tier 2 cities such as Ahmedabad, Lucknow, Chandigarh, etc. have caught up to some extent, offering similar infrastructure and amenities. Business and job opportunities have also started to grow in these cities. Along with great lifestyle, the Tier 1 cities also come with problems such as overcrowding, congestion and pollution. Tier 2 and 3 locations, on the other hand, are much less densely populated. This lessens the above-mentioned problems in these cities. Moreover, lower population density means lesser pressure on land and hence lower property rates than the metro cities.
Abundant Job prospects were pretty much the main reason for people to migrate to and stay in the Tier 1 cities. However, with the lockdown imposed to contain the spread of Coronavirus, a section of these migrants have lost their jobs. This has not only removed their incentive to live in the metro cities but also placed many of them in a financial crisis. With the lack of a means of income, they now need to seek more frugal lifestyles. Living in the Tier 1 cities is usually quite expensive; hence, many of these migrants are forced to return to their hometowns, which in many cases are the lower-tier cities.
The process of reverse migration has resulted in an increasing demand for homes in Tier-2 and 3 cities. Developers are starting to consider taking up more projects here. The buyers would be mostly reverse migrating end-users, NRIs, investors and first-time buyers who earlier lived in rented homes. The pandemic situation has created the need to stay in one’s own home rather than a rented one, for the sake of health and safety. Investors would also find properties in Tier 2 and 3 cities profitable as they are relatively more budget-friendly and the demand for rental homes would rise as not every person travelling back to their hometowns can afford a new home.
