As the country eased the lockdown across cities, the growth of virtual demand for residential property in smaller cities has grown almost three times in August 2020, compared to the same period in 2019.
Economic growth and housing demand — which have so far remained concentrated in the top eight cities of India, including Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Delhi NCR, the Mumbai Metropolitan Region (MMR) and Pune – are gaining momentum in Tier II & Tier III or ‘shadow’ cities with the trend becoming more prominent post the nationwide lockdown, according to a report by Housing.com.
The report says that shadow cities are gaining momentum in the country and are on the radar of companies, investors and developers. Set in motion by various policies and infrastructure initiatives, smaller cities are expected to further the Indian consumption story and kickstart green shoots of recovery for India, especially amid the current pandemic.
Though development in ‘shadow cities’ has moved at a snail pace, the current pandemic crisis has brought structural changes in business continuity, which will notably accelerate the process of market penetration across sectors. Steered by the thrust on digitisation, and an aspirational cohort, shadow cities are exhibiting readiness for global brands across categories of fashion, luxury cars, jewellery, real estate, among many others.
“We at Housing.com have seen a significant uptick in interest levels for residential properties especially from shadow cities such as Amritsar, Chandigarh, Vadodara, Nagpur, Vijayawada and Coimbatore. Our ‘Virtual Residential Demand Index’ renders this trend more prominently post May 2020. Going forward, we believe factors such as reverse migration of the white-collar workforce along with the concept of remote working will have powerful reverberations on the future of residential demand coming from the small cities,” says Dhruv Agarwala, CEO, Elara Group.
As the country eased the lockdown across cities, the growth of virtual demand for residential property in smaller cities has grown almost three times in August 2020, compared to the same period in 2019. The analysis of online interest parameters suggest that there has been a significant increase in interest levels for both buying and renting a home in the ‘Shadow Cities’. It is to be noted that the interest in the smaller cities has been gradually increasing and the share increased to 27 percent in the first half of 2020, as compared to 18 percent in the same period in 2019.
Post the sharp decline in virtual interest in April 2020, it has recovered rather quickly and has been on an upswing since then with virtual interest for residential spaces between June and August 2020, overarching the pre-COVID levels of January–March 2020.
Cities such as Agra and Amritsar witnessed an impressive growth of more than 100 percent in the virtual residential demand over pre-COVID times, while cities of Vadodara, Ludhiana, Mangaluru, Chandigarh and Lucknow saw more than 80 percent growth in residential demand. This growth in smaller cities can be attributed the imposed lockdown which has enforced a majority of workforce in metro cities to move back to their homes in smaller cities.
On the other hand, the top 8 cities, which have been severely hit by the pandemic, have witnessed a subdued growth in virtual demand for residential spaces over the pre-COVID period. For instance, maximum cases of COVID-19 in the country are recorded in the state of Maharashtra from which a majority are concentrated in Mumbai and Pune. Barring Kolkata, Ahmedabad and Delhi NCR, the remaining metro cities of Mumbai, Pune, Chennai, Hyderabad and Bengaluru saw less than 50 percent growth over the pre-COVID times.
Moreover, apart for reverse migration from the metro cities giving impetus to the virtual residential demand in the smaller cities, several organisations are also adopting ‘remote working’ and planning to continue it for the foreseeable future. The opportunity of working remotely and changing use of residential spaces in the current scenario are also compelling home dwellers to rethink about upgrading their current home configuration.
“As our analysis points out that, ‘Shadow Cities’ saw a 59 percent growth in the price bracket of less than Rs 50 lakh, with maximum traction coming from cities of Vadodara, Nagpur and Lucknow. Similarly, the cities of Jaipur, Vishakhapatnam, Kochi and Surat saw maximum growth in demand for residential property in more than Rs 1 crore price bracket over the pre-COVID period. This corroborates the fact that the pandemic has propelled more and more people from the smaller cities to explore residential property, through the virtual platforms,” Agarwala says.
Major developers from around the country are already eyeing these ‘prime’ cities. “We have always tried to set international standards for ourselves so that our customers get the best. We now plan to take this experience across various cities in India. The towns close to the Capital are a good bet apart from cities such as Jaipur, Bhopal, Sonepat,” says Amit Jain, MD, Mahagun Group.
What can people expect from such forays? “These projects in tier II and III cities are not just comprehensive residential hubs but are meant to provide a new way of life. It is life amidst the very best of nature coupled with strategic locations and ultra-modern facilities,” adds Harvinder Singh Sikka, MD, Sikka Group.
Industry experts predict that towns and cities with populace between 0.5 and one million will see significant real estate developments. Residential markets across various tier-II or tier-III cities have witnessed heightened activity which is likely to grow more after the Corona scare. “One reason for the emergence of these towns as viable options is the availability of relatively cheaper real estate options. Importance of these smaller cities is also significant due to the fast-spreading IT-ITES industry, which is mostly entrenched in the key metros. Escalating real estate costs, paucity of skilled IT professionals and overstressed infrastructure are creating challenges for IT-ITES organisations operating in Tier I cities,” says Yash Miglani, MD, Migsun Group.