Indian real estate developers are now expanding into Tier 2 and 3 cities to launch new projects. The trend is particularly prominent in northern and western India, with Panipat, Ludhiana, Nagpur, and Panchkula accounting for 75% of the total acquired land in these cities. Between January 2022 and October 2023, real estate developers acquired roughly 3,294 acres of land across the country, with 44.4% of these transactions occurring in Tier 2 and 3 cities, accounting for 1,461 acres spread across 17 separate deals, according to real estate and investment management company JLL.
This shift reflects the success of reputable developers in finalizing numerous land deals in response to rising customer demand and increased purchasing power. For instance, DLF’s inaugural project in Panipat sold out within an hour of its launch, and Godrej Properties sold out phase 1 of its plotted development project in Sonipat within two days of its launch.
Buyers in Tier 2 and 3 cities are seeking quality homes, leading to an increase in demand for such projects. Driven by the remarkable residential sales in emerging cities, developers are also acquiring land to create future supply pipelines. Developers such as Godrej Properties, M3M, Eldeco Group, and Omaxe Group have either entered or expanded their presence in these burgeoning markets through recent land acquisitions.
According to Samantak Das, chief economist and head of research and REIS, India, JLL, if Tier 2 and Tier 3 cities are developed with proper infrastructure, both physical and social, people would be more likely to move there due to the expensive home prices in Tier 1 cities. Additionally, there is organic demand within the Tier 2 and Tier 3 cities from people who are already staying there.
In the land transaction snapshot of Tier 2 and 3 cities from January 2022 to October 2023, it was found that approximately 1,339 acres have been designated for prospective residential developments, with a major emphasis on plotted residential units. This focus on low-rise and plotted developments is due to the local populace’s preference for these formats, as people are seeking independence and want to move into their own apartments.
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