NEW DELHI, June 24
As India marches towards becoming the third-largest economy of the world, emerging cities are poised to play a critical role in the nation’s growth trajectory. It is expected that by 2050, India will have nearly 100 cities with population exceeding one million, in addition to its eight mega-cities, according to the Equitable Growth and Emerging Real Estate Hotspots report by Colliers. Factors such as infrastructure development, digitisation, tourism and changes in the office landscape will drive the next wave of urban growth across these locations. As per the report, Amritsar, Ayodhya, Jaipur, Kanpur, Lucknow and Varanasi in North; Patna and Puri in East; Dwarka, Nagpur, Shirdi and Surat in West; Coimbatore, Kochi, Tirupati and Visakhapatnam in South; and Indore in Central India are the top 17 high impact emerging real estate hotspots in India. In these cities, residential, warehousing and retail are the high impact segments as residential in 13 cities, warehousing in 10 cities and retail in 13 cities were considered as the high impact segment out of the top 17 cities. The other high impact segments, according to the report, are office, hospitality, senior living and data centre. However, only 4 cities out of 17 observed offices as their high impact segment while 7 cities believe hospitality as their high impact segment. Senior living and data centres were pointed as the high impact segment in 7 cities each. Interestingly, smaller towns are emerging as dynamic contributors to India’s economy due to improved infrastructure, affordable real estate, skilled talent, and government initiatives. “This growth is set to propel the real estate sector to an estimated $1 trillion by 2030 and potentially $5 trillion, a 14-16 per cent share in GDP by 2050,” said Badal Yagnik, Chief Executive Officer, Colliers India.
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Furthermore, enhanced connectivity and increased manufacturing activity driven by flagship infrastructure projects under National Infrastructure Pipeline (NIP) and PM GatiShakti is expected to lead the dispersion and expansion of growth centres beyond tier-I cities. The development of factories and MSMEs are expected to be reason behind increasing warehousing requirements across emerging hotspots within infrastructure corridors. Why are real estate demand across segments increasing in tier-II cities? According to the report, due to the rising prevalence of hybrid working, companies are increasingly adopting the hub and spoke model, establishing satellite offices in smaller towns. Parameters including current technology landscape, start-up ecosystem, availability of skilled talent, current and proposed infrastructure upgrades and proximity to established office markets are the probable reasons. In fact, Coimbatore, Indore and Kochi are amongst the locations having high potential as satellite office markets.
“Office rental arbitrage, typically 20-30 per cent lower and relatively affordable housing market in these locales creates a win-win scenario for companies and employees. This surge in demand is set to ignite a wave of interest from leading real estate developers, ushering in an influx of high-quality supply in these markets,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.
For warehousing and data centres, increased digitisation is the reason behind the boost in real estate activity in smaller towns. It is anticipated that the growth of e-commerce will facilitate the expansion of online retail platforms, leading to the development of fulfilment centres, warehouses and distribution hubs in strategic locations.
Additionally, the surge in data consumption will drive the development of data centres and smart infrastructure in these emerging cities, which will enhance the overall attractiveness of these towns for real estate investments. The report identified Jaipur, Kanpur, Lucknow, Nagpur, Patna, Surat and Visakhapatnam as the cities expected to witness heightened digitisation driven real estate activity.
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Spiritual tourism is another reason to be a critical growth driver for the development of several temple towns in India. Upgrades in infrastructure and enhanced connectivity through improved roads, flagship trains and new airports have the potential to attract organised real estate players to these spiritual destinations in the long term, specifically across hospitality and retail segments. Amritsar, Ayodhya, Dwarka, Puri, Shirdi, Tirupati and Varanasi emerged as cities to watch out for in terms of growth driven by spiritual tourism.
Identification of high impact locations with respect to spiritual tourism involved analysis of multiple parameters including sanctioned allocations under various government programs, annual tourist footfalls in primary pilgrimage sites, upcoming plans of real estate developers and land price appreciation.
