NEW DELHI: India’s tier II-III cities are expected to drive the next cycle of growth in the housing market as demand in big cities has been affected due to a surge in home prices post-COVID pandemic, according to Square Yards.
Real estate consultant Square Yards has come out with a report ‘India’s Next Real Estate Growth Cycle: The Rise of Tier-2 and Tier-3 Cities’, which pointed out that affordability to buy homes across major cities have been impacted badly because of a huge price rally during 2022-24.
Limited new supply of affordable and mid-income homes in the seven major cities - Mumbai Metropolitan Region, Pune, Bengaluru, Delhi-NCR, Hyderabad, Chennai and Kolkata - has made matters worse.
“India’s residential market is entering a structurally distinct phase. The post-pandemic premium cycle that powered accelerated price appreciation across metro markets is now showing signs of stabilisation,” the report pointed out. In several tier1 corridors, Square Yards said, the price growth has outpaced income expansion, resulting in visible affordability compression and a gradual tempering of incremental demand at higher ticket sizes.
The consultant mentioned that the next phase of growth in India’s housing market would come from tier II and tier III cities. In contrast, emerging cities are exhibiting a more sustainable growth configuration. These markets offer lower entry ticket sizes and stronger price-to-income alignment, creating a more accessible ownership landscape,” the report said.
Employment expansion beyond metros is broadening the residential demand base, the consultant said, adding that the housing demand in these smaller cities is largely end-user driven. The report has listed cities, such as Bhubaneswar, Cuttack, Erode, Puri, Varanasi and Visakhapatnam, to spearhead the next growth cycle.