Smaller cities are finding favour with realty developers, thanks to initiatives such as the Smart City Mission, AMRUT and PMAY. Exorbitant property prices because of the space crunch in metros are gradually driving developers to smaller cities, say industry players and observers.

According to Real Capital Analytics (RCA), non-metro cities have seen a growth of 17 per cent in real estate investments in 2017 over 2016.

Incentives

“Real estate players are looking to smaller cities mainly because of the cash subsidy interest under the PMAY scheme and 100 per cent tax exemption for flats of 60 sq mt carpet area in these cities,” said Anand Gupta, former General Secretary, Builders’ Association of India.

Infrastructure, industrial growth, user base are some of the factors developers take into consideration when entering new markets.

“Cities which are performing well economically, with favourable job creation prospects, tend to attract migration which in turn creates demand for new homes and rental housing,” said Sangeeta Prasad, Chief Executive Officer, Mahindra Lifespace Developers Ltd.

Location

According to industry experts, Surat, Jaipur, Nagpur, Kochi, Lucknow, Rudrapur, Nashik, and Mysuru are among the sought-after cities for developers.

Tier-2 and 3 cities that are closer to metros always have an advantage. “These cities are preferred by the developers as they provide an excellent opportunity to them,” said Getamber Anand, Chairman and Managing Director, ATS Infrastructure Ltd.

However, it seems secondary sales in these markets have not picked up as fast as primary sales. “It is largely because prices in the primary sales segment in many cases are on a par with the secondary sales. In other words, buyers can get a new flat for almost the same price as an older one, in the projects which have better and modern amenities,” said Santhosh Kumar, Vice-Chairman, Anarock Property Consultants.

Rental status is also an important aspect. “The growth in this segment depends on two factors: those coming to these cities for jobs for a temporary period and student housing,” said Gulam Zia, Executive Director, Advisory, Retail and Hospitality, Kinght Frank (India) Pvt Ltd.

Challenge

“National developers who are less familiar with these markets than local players might have a harder time gauging the exact demand in terms of budget range, micro-locations, etc.,” Kumar said.

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