June 26, 2014

Advantages of Property Investment in Tier 2 and Tier 3 Cities

Indian cities are generally classified as Tier 1, Tier 2 or Tier 3 based on real estate, business and commercialization. Tier 1 cities include most of the well-developed metros such as Chennai, Mumbai, Delhi, Kolkata and Bengaluru. These cities are extremely commercialized metros with huge infrastructure and well developed roads. Properties in these cities are very highly priced. Tier 2 cities are the next set of cities, which are comparatively smaller than Tier 1 cities; for example, Pune, Vishakhapatnam, Coimbatore, Cochin and Ahmedabad. These cities are slowly witnessing a growth in both commercial and residential aspects in recent times, owing to the fact that Tier 1 cities have reached a saturation point in terms of development. Realtors find these cities to be lucrative spots for future developments. Tier 3 cities like Trichy, Madurai, Baroda and Nasik are in the initial stage of development.

Property Investment in chennai

Tier 1 metro cities have become so congested that the real estate developers have slowly started to shift their base to the Tier 2 and Tier 3 cities. These cities are nowadays viewed as an excellent investment option because of the growing demands and increasing property prices in the Tier 1 cities. Apart from that, many IT/ITES companies have started looking up various cost-effective Tier 2 and 3 cities because of the increase in labor costs, increasing real estate prices and attrition of infrastructure. In comparison with Tier 1 cities, there are many advantages of purchasing a property in Tier 2and Tier 3 cities.

Property Investment in Tier 2 and Tier 3 Cities

•    Affordable prices are one of the major reasons for increasing developments in the Tier 2 and Tier 3 cities. Real estate prices in these cities are roughly two-fifths of those in well-established cities. Tier 2 and Tier 3 cities are considered to be a good alternative with regards to many requirements like house rent, education, etc. as they are comparatively cheaper than those of major cities.

•    Many Government initiatives are being taken up for providing infrastructural facilities, building management and also for the creation of many SEZs in these areas, which in turn play a vital role in the development of such small cities. Pharmaceuticals, automotive companies and many financial, corporate, and real estate companies have started their projects in these cities, hoping to turn them into business havens in the future.

•    Better connectivity of these Tier 2 and Tier 3 cities also adds to their advantages. Well-connected roads like state highways and national highways do in fact ease transport issues. Most of the Tier 2 and Tier 3 cities have good railways and roadways and have very good transport facilities like government-run buses, etc. Apart from that, cities like Madurai and Cochin are also among well-known tourist destinations, which in turn attracts lots of tourists; and so, having good transport is an added advantage.

•    Manpower and infrastructure in most of the Tier 2 and Tier 3 cities is experiencing a boom with more & more companies coming up. Apart from this, there are also many infrastructural developments with state-of-the-art buildings, which in turn attract lots of skilled manpower to these localities. Developing cities of Tier 2 and Tier 3 sectors offer peaceful residential properties for investors, when compared to that of noisy and commercialized metro cities.

•    Tier 2 and Tier 3 cities offers good quality transportation, shopping facilities, lower cost of living and better townships, all of which attract many property buyers to these areas. Most of the properties in these localities are either purchased by NRIs or retired folk, who want to reside in a peaceful locality unlike the city metros. Home buyers purchasing properties purely for investment purpose prefer these localities as they are very cost-effective and have a better standard of living.

Most of the metro city residents consider investments in Tier 2 and Tier 3 cities as a very good option owing to their nearness to major localities and cost-effectiveness. Real estate markets in these areas are experiencing significant change in recent times.