Tier 2 cities are outpacing traditional metros in their economic growth, thanks to numerous fields like manufacturing, information technology, education, and healthcare. For example, Nagpur is expanding in manufacturing, logistics, and information technology, whereas  Surat is rising in textiles, petrochemicals, and information technology. 

Real estate markets in non-metros or Tier-2 cities continue to grow swiftly, outperforming many metros in terms of investment and demand. Several factors contribute to the massive increase in real estate investment in non-metros. 

According to a recent analysis by Cushman and Wakefield and the Confederation of Real Estate Developers’ Associations of India (CREDAI), approximately 35% of India’s population currently lives in cities, with projections indicating that this figure will rise to 50% by 2050. 

This population growth is putting a strain on Tier 1 cities, where space is becoming more scarce. As a result, there is a greater emphasis on developing alternative urban areas with the potential to become new economic and real estate hubs. These are classified as Tier-2 cities. According to CREDAI, India’s urbanization rate is expected to exceed 50% by 2050, potentially leading to significant population migration to Tier 2 cities. 

Manaki Parulekar, Co-Founder of Claravest Technologies, shared her insights into the factors driving real estate investment growth in Tier 2 cities. 

According to Parulkar, this rise of integrated townships, which provide a mix of residential and commercial spaces, is helping Tier-2 cities grow. “For example, Panvel in Navi Mumbai is rapidly developing, with townships such as Hiranandani and Godrej, aided by projects such as the Navi Mumbai International Airport and the Atal Setu Bridge (MTHL).” 

The rise of commercial Grade A properties, affordable residential property values, and improved connectivity are driving accelerated growth in other cities like Jaipur, Bhubaneswar, Nagpur, Surat, and Kochi. 

These cities and regions have distinct advantages over traditional metro markets, attracting investors with promising opportunities for Parulekar, the following factors contribute to increased real estate investment in non-metros or Tier 2 cities.  

Diverse economic  development: 

Tier 2 cities are outpacing traditional metros in their economic growth, thanks to many industries such as manufacturing, information technology, education, and healthcare. For example, Nagpur is expanding in manufacturing, logistics, and information technology, whereas Surat is rising in textiles, petrochemicals, and information technology. 

Cost advantages: 

Tier-2 cities are significantly less expensive than Tier-1 cities. Low operational costs in these areas contribute to this advantage, making them appealing to businesses and investors.

Improved Quality of Life: 

Tier-2 cities offer a more relaxed lifestyle than larger metropolitan areas, with less traffic congestion, lower pollution levels, and a generally quieter environment. This improved quality of life appeals to businesses seeking a dedicated workforce and individuals seeking a better work-life balance. 

The government’s initiatives include: 

Government investments in transportation networks, airports, highways, and reliable power and communication systems support the growth of Tier-2 cities. 

Real-estate market growth: 

The real estate market in Tier 2 cities is thriving, particularly in the residential segment. Professionals want to live in larger apartments, remote work is becoming more popular, and there is a growing middle class with more purchasing power. Despite rising property prices, they remain less expensive than those in Tier-1 cities, creating appealing investment opportunities. 

Advancements in education and healthcare: 

Tier 2 cities are increasingly home to reputable educational and healthcare facilities, making them more appealing places to live and work. 

To summarize, these factors make non-metro areas attractive real estate investment destinations, often offering more sustainable growth and profitability than traditional metro areas saturated and high-cost environments.