India’s Tier-2 cities close in on metros as property rates rise 10-15%

India’s Tier-2 cities are rapidly narrowing the gap with the country’s top metros as far as real estate value goes. Property prices in Tier-2 cities have surged by 10 to 15 per cent in prime areas propelled by infrastructure development, rising economic opportunities and reverse migration, according to Housing.com’s new report titled The Bharat In India.

The report points out that just as the metropolitan cities, residents in Tier-2 cities, too, now prefer highrise apartments, preferably ones that offer facilities that include open spaces, clubhouses and sporting activity.

Capital value of property in prime localities of urban hubs such as Chandigarh Tricity (comprising Chandigarh, Mohali and Panchkula), Kochi and Goa now nearly touch prices in significant areas of Delhi-NCR and Mumbai Metropolitan Region, the report observes.

In Kochi, for instance, capital prices of prime localities such as Edapally, Kaloor and Vyttila that are located near NH 66 range from Rs 6,000-10,000 per square feet, the report says. The high price is dictated by the proximity of the areas to Metro, retail hubs and other vital infrastructure.

Similarly, Goa is among Tier-2 cities that have a strong rental market with around 8 per cent yield compared to the metropolitan cities of India, where the rate ranges from 2 per cent to 3 per cent, according to the report.

Villas in Goa, in particular, attract investors among high net-worth individuals who don’t mind spending, consequently driving up the capital value of the area to almost at par with the metros, the report says. The prime locale of Anjuna commands the highest property rates in Goa, between Rs 17,000-Rs 19,000 per square feet, and compares with markets such as Golf Course Extension in Gurugram where prices range from Rs 15,000-Rs 17,000 per square feet and Thane West in Mumbai Metropolitan Region where property costs Rs 14,000-Rs 16,000 per square feet.

While online property searches reveal that potential buyers in the Rs 1-2 crore segment have increased by 61 per cent, buyers wishing to invest over Rs 2 crore have grown by almost 121 per cent, the report says.