Prominent developers are making investments in Tier II cities to construct malls, facilitating the entry of national and international brands into smaller cities and creating fresh growth prospects in these unexplored areas.
According to data from real estate firm CBRE, brands including H&M, Marks & Spencer, GAP, and Tasva have opened stores in cities like Indore, Mangalore, Patna, Ranchi, Mysore, and Coimbatore.
According to data, the amount of retail space in Tier-2 cities is estimated to have exceeded 29 million square feet, and a strong pipeline of upcoming projects is moving retail from traditional storefronts to upscale locations.
“As India gears for rapid urbanization, Tier-2 and 3 cities witness a transformation in the real estate landscape. With the sharp shift in the consumer lifestyle, the cities are evolving into vibrant hubs of growth and innovation which are immensely increasing their realty prospects,” said Abhishek Bansal, Executive Director of Pacific Group which has expanded in Dehradun.
Due to an increase in migratory foot traffic, luxury brands are also currently growing in places like Chandigarh and Ahmedabad.
Tier-1 cities continue to be important hubs for expansion, but Tier-2 markets (Chandigarh, Jaipur, Lucknow, Indore, and Kochi) are gaining traction and drawing in new companies. Tier-2 cities are being targeted by institutional investors.
Developers are moving to smaller towns to acquire land in order to meet the increasing demand, and as a result, capital inflows across Tier-2 and Tier-3 locations more than quadrupled in 2023 and reached a record high of US $ 1.3 billion, compared to US $ 0.6 billion in 2022.
Despite the fact that the average annual inflow from 2019 to 2022 was US $ 0.5 billion, development sites and the logistics industry accounted for over 85% of transactions in these locations.
CBRE reports that increased private equity (PE) interest is being seen in a number of these cities, including Ahmedabad, Indore, Jaipur, and Coimbatore. These sectors include e-commerce, start-ups, banking, financial services, and insurance (BFSI), all of which can have a positive effect on real estate investments.
