Unlocking the Potential of India’s Real Estate Markets beyond Metros

Gone are the days when only Tier I cities dominated India’s realty sector. Emerging micro markets in Tier II and III cities are the next real estate hotspots. These smaller cities are gaining prominence due to their affordability, increasing job opportunities, and enhanced quality of life.

As a result, developers, investors, and residents are increasingly recognizing the potential of these thriving communities and leveraging their advantages to create vibrant urban landscapes.

Urbanisation Redefining the Industry

India’s urbanization rate has grown by approximately 5% over the last 10 years and stands at 36% currently. It is likely to cross 40% by 2030. This rapid urban migration has significantly transformed the country’s real estate sector. In fact, Tier II cities contributed to  80% of housing sales in 2023-24 across 30 smaller towns. Government-driven initiatives such as the Smart Cities Mission and the Bharatmala project focused on improving India’s infrastructure, have further elevated the appeal of these emerging cities.

Infrastructure: The Growth Pillar

Infrastructure serves as the backbone of real estate growth, particularly in expanding metro areas and Tier II and Tier III cities. Government initiatives such as AMRUT and Gati Shakti have significantly enhanced transport networks, utilities, and civic facilities across urban fringes, driving development outside traditional city limits.

For instance, Doddaballapur in North Bengaluru has emerged as a real estate hub, supported by key infrastructure like the Doddaballapur-Hoskote Highway and Bengaluru’s highly anticipated Peripheral Ring Road.

Similarly, Hebbal, once a quiet suburb, is set to become a major multimodal transit hub by 2028, featuring one suburban station and three metro stations. These examples highlight how Bengaluru’s metro boundaries are expanding to accommodate rapid urbanization and growing demand for housing and business opportunities.

The emergence of micro-markets like Doddaballapur and Hebbal highlights how metros are evolving into dynamic urban extensions. These areas are becoming hubs for industries such as IT parks, business parks, and special economic zones, providing a steady flow of job opportunities.

Enhanced connectivity, better infrastructure, and focused urban planning are attracting businesses and residents to these new frontiers of metrocities. With lower operational costs and access to a growing talent pool, these emerging micro-markets are viable alternatives to core metropolitan areas.

For example, Boeing’s upcoming campus in North Bengaluru’s Devanahalli and Royal Philips’ Innovation Campus in Yelahanka further emphasize how such regions are redefining Bengaluru’s urban landscape.

Affordability, Wellness, and Economic Prospects

Rising property costs in Tier I cities are also a driving factor for the popularity of Tier II and III cities. These developing regions provide affordable housing and lower living expenditures, which make homeownership more accessible to the increasing middle class.

Young professionals, particularly those with families, are increasingly choosing these locations because of affordable healthcare and education costs, as well as to enjoy a better work-life balance.

Other than affordability, Tier II and III cities offer a better quality of life compared to cities. Clean air, lush greenery, and less traffic congestion make these cities appealing to buyers, especially senior citizens who prefer a healthy and serene lifestyle.

Development Management Model: Game Changer

One of the most critical enablers of this transformation is the Development Management Model, DMM. By promoting collaboration between national and regional developers, the model bridges the gap between technical expertise and local market knowledge.

National developers bring strategic vision, operational experience, and quality control to the table, while regional players facilitate efficient land acquisition and market analysis.

Besides easing complex regulatory processes in the Tier II markets, DMM also helps attract investments by mitigating risks through timely project delivery.

This model establishes standards for quality control and thereby assists in the professionalization of the sector in smaller towns, thus opening up big-ticket opportunities for office space, retail, residential projects, and even data centers. This collaborative approach encourages sustainable growth along with regional development.

Wrapping Up

The emergence of Tier II and Tier III cities marks a transformative shift in India’s real estate landscape. These cities are no longer mere extensions of metros but are evolving as independent growth engines.

Offering affordability, sustainability, and innovation, they cater to the aspirations of a rapidly expanding middle class while providing quality housing and infrastructure that attract both residents and investors.

With urbanization driving population growth and government policies fostering development, these cities hold immense potential. Developers who adapt their strategies to tap into these markets stand to benefit significantly, as these regions offer abundant opportunities for long-term growth.

As India aspires to become a $10 trillion economy by 2030, the development of urban infrastructure in Tier II and Tier III cities will be pivotal. With urbanization rates projected to approach 50% by 2050, these emerging markets are set to become epicenters of holistic urban development.

The future of Indian real estate is bright, and the shift from metros to these dynamic markets is not a fleeting trend but a well-grounded evolution. This transition promises sustained success for developers, investors, and residents alike, contributing to India’s broader economic and social progress.

–Authored by Srinivasan Gopalan, CEO of ArisInfra Solutions Ltd