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Why Tier II cities are faring better than their Metro counterparts

Kolkata, South Central CBD

The real estate market in the country is cited to be one of the most uncertain sectors. While one would think that it’s the Metro cities that are faring well due the established infrastructure present there- it’s actually the Tier II cities that are garnering a lot of attention. Data by the National Housing Bank’s Residex Index proves the same.

Residential properties along most of the Metro cities like Mumbai, Delhi and Bangalore have documented a dip in the past year, while Tier II cities like Kolkata, Chennai (with an exception) and Nagpur have witnessed a double digit gain when it comes to appreciating property values. Some of the factors that are driving rapid development and growth in Tier II cities are affordable property prices and lower cost of living. And with a number of IT companies now establishing their bases in many of these cities, the employment opportunities are luring many individuals to shift base there.

As per the data, Metros like Delhi NCR and Bangalore have witnessed a dip of 1.5% and 1.8% in the last one year. While cities like Chennai, Surat and Nagpur have gained 12.5%, 18% and 10.5% respectively. Urban development and physical infrastructure have played a pivotal role in the growth of these cities. For instance, the proposal to build several sky bridges and skywalks in the densely populated areas in Surat by the SMC (Surat Municipal Corporation) has buoyed buyer sentiment thereby enticing many realty developers to announce residential projects here. Similarly, Nagpur’s seamless road, rail and air connectivity to all the Metros has led to a rapid developments for the realty sector.

Amongst the 26 cities which were a part of the survey, Meerut, Ludhiana and Vijayawada have documented the highest decline in property prices. Capital values in Meerut fell by 13.61% while Ludhiana and Vijayawada dipped by 13.17% and 13% respectively. Insufficient infrastructure and lack of political stability are some of the factors that have contributed towards the decline.

However, in the year on year analysis, cities like Chennai, Faridabad, Ahmedabad, Bhopal, Kolkata and Pune have emerged as realty hotspots. These cities have registered property price escalation of over 250% (for Chennai alone) and 100% respectively.

So if you are going to make a realty investment that should give formidable benefits- don’t hesitate to make a realty deal in Tier II cities. They are the ones that are surpassing metro cities when it comes to high ROI.

Nidhi C Thacker for IndiaProperty.com

Image: By Kolkatan (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

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