As we approach the end of 2023, the Indian real estate market is experiencing robust growth and heightened sentiments, particularly in the residential segment. Investor and buyer preferences have undergone a paradigm shift, significantly shaping the trajectory of the realty market. The residential sector has been a beacon of stability, demonstrating substantial growth potential throughout 2023.
The impressive growth graph is underpinned by sustained demand, increased purchasing power, aspirational living, and a resilient GDP expansion. One of the noteworthy trends has been the heightened demand for premium and luxury residential properties not only in metros but also in non-metros, reflecting a shift towards growing aspirational living in tier 2 cities.
The impressive surge witnessed in the demand for luxury housing encouraged developers to launch new luxury projects. Recent trends show that the top 7 property markets in July-September 2023 had the highest share of luxury real estate in the last five years. The expansion of the luxury housing segment can be attributed significantly to the fast-evolving affluent lifestyle. The new-age demographic seeks comprehensive fulfillment of their requirements, placing significant importance on the aspirational element of acquiring bigger and more luxurious homes. As a result, there is a notable transition towards the luxury housing segment, characterized by high-end lifestyles and inclusive amenities.
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Tier 2 cities: Rising stars
Recent reports have highlighted the noteworthy contribution of tier 2 cities in India to the nation-building narrative. The report envisions India as a USD 5 trillion economy by the financial year 2026-27. Tier 2 cities are becoming the focal points of the real estate market in India. Despite grappling with substantial population growth and infrastructural challenges, these cities are attracting homebuyers and developers alike.
The shift towards tier 2 cities is not solely driven by infrastructural potential, but also by the evolving nature of work. With the normalization of work from anywhere culture, professionals are choosing to reside in tier 2 cities where they can buy premium and spacious homes without compromising on professional commitments. This trend is reshaping the real estate narrative and propelling tier-2 cities into the limelight.
The developer community is increasingly focusing on tier 2 cities, as indicated by industry trends and reports. These cities offer vast potential for greenfield and futuristic infrastructural development, making them promising destinations for both capital and rental appreciation. Between January 2022 and October 2023, developers have acquired approximately 3,294 acres of land. Out of these transactions, 44.4 percent, covering 1,461 acres, took place in tier-II and tier-III cities, involving 17 land deals.
Cities like Panchkula, Nagpur, Palghar, Khalapur, Panipat, and Ludhiana have collectively contributed around 75 percent of the total 1,461 acres of land acquired in tier-II and III cities. Developers are focusing on low-rise and plotted developments in these areas, as they align with the growing preference for such living formats.
At the same time, there has been a notable uptick in demand for independent floors, driven by the desire for low-density living. Buyers are now looking for indulgent lifestyles that offer ample space and freedom of choice. This trend gained momentum during the pandemic, as buyers increasingly preferred neighborhoods characterized by low-rise buildings and serene environments.
Tri-City and beyond
The Tri-city area, consisting of Chandigarh, Mohali, and Panchkula, has gained popularity as a thriving residential market. It has attracted the attention of potential homeowners and investors alike due to its well-planned urban infrastructure. The region is known for its high standards of well-designed cities, Chandigarh being a prime example. Panchkula, in particular, highlights the region’s focus on green spaces and a peaceful environment, further establishing Tricity as a hub for both work and leisure. The demand for luxury and premium homes in Tricity is on the rise. The urbanization rate is expected to reach approximately 36% this year and is projected to hit 50% by 2050. This highlights the significance of tier 2 towns in India’s real estate growth trajectory.
India is expected to see a surge in investment activity in the Asia Pacific region in 2024, positioning it as a major destination for inflows. This creates an atmosphere of growth and opportunity, making it appealing to professionals and families who seek a harmonious lifestyle.
As we approach the end of the current calendar year, which has already set a positive template for the real estate industry, the flourishing property market indicates a promising 2024. The rise of tier 2 cities and luxury housing isn’t just a trend, but fundamental changes that will lead the sector towards new horizons. They will contribute substantially to India’s growth story.
(By S K Narvar, Group Chairman, Trident Realty. Views are personal)
