An extensive examination of various demand and supply parameters from the social, economic, financial, and real estate sectors has been carried out concerning these urban locations.
India is swiftly ascending to the position of the third-largest economy globally, with emerging cities anticipated to play a pivotal role in driving the nation’s economic growth. By the year 2050, it is projected that India will boast nearly 100 cities each housing a population exceeding one million, in addition to its eight megacities. Significant contributors to this urban expansion will include tourism, digitization, advancements in infrastructure, and evolutions within the office landscape.
In its recent report titled "Equitable Growth and Emerging Real Estate Hotspots," Colliers analyzed over 100 emerging cities, focusing on these critical parameters to evaluate their attractiveness and potential for real estate growth over the next five to six years.
Various unique social, economic, financial, and industry-specific supply-side metrics were meticulously assessed during this detailed analysis of the cities. Colliers employed a comprehensive framework, considering the aforementioned factors to ascertain their impact across different real estate segments in these locales, including office spaces, residential properties, warehousing, retail, hospitality, and alternative investments (such as data centers and senior living).
Among the cities observed, the analysis identified 30 locations poised for substantial growth in the medium to long term. Remarkably, real estate development is anticipated to accelerate across three or more asset classes in 17 of these potential hotspots. The geographical distribution of these 17 emerging real estate hubs across Northern, Southern, Western, Eastern, and Central regions highlights a trend toward equitable growth across the country.
“Affordable real estate, skilled labor, improved infrastructure, and supportive government initiatives are transforming smaller towns into vibrant contributors to India’s economic narrative. The real estate sector is set to burgeon to an estimated $1 trillion by 2030, possibly soaring to $5 trillion by 2050, comprising 14-16% of the GDP. This growth is expected to reverberate across retail, hospitality, commercial, residential, and industrial segments, with notable activity in other asset classes, including senior housing, data centers, and vacation homes,” stated Badal Yagnik, CEO of Colliers India.
Continued advancements in infrastructure will remain a primary catalyst for real estate expansion across India. Enhanced connectivity and increased manufacturing driven by flagship projects such as PM GatiShakti and the National Infrastructure Pipeline (NIP) will lead to decentralized growth outside Tier 1 cities, ultimately generating substantial economic activity in smaller towns and boosting both residential and warehousing real estate markets. Moreover, developing areas along infrastructure corridors will witness rising demand for storage spaces as factories and MSMEs flourish in conducive environments. Colliers' analysis took into consideration various aspects such as proximity to major infrastructure projects, concentration of warehouses and active MSMEs, and overall infrastructure allocations throughout the cities to quantify the impact of infrastructure on real estate.
Transformations in technology and evolving work models are set to drive the demand for office spaces and residences in emerging cities.
With the shift towards hybrid work configurations, companies are increasingly adopting the hub-and-spoke model, establishing satellite offices in smaller urban locales. Colliers conducted an in-depth evaluation, analyzing multiple factors like the local start-up ecosystem, existing technological frameworks, skilled labor availability, planned and ongoing infrastructure advancements, and the city's proximity to well-established office markets, to pinpoint high-impact locations. Among various cities, Coimbatore, Indore, and Kochi were singled out as prime candidates for satellite office markets.
As tech leaders and innovative startups capitalize on the substantial talent pools available in these emerging hubs, smaller urban areas are on the brink of experiencing transformative booms in both office and residential markets. The favorable rental conditions paired with an overall 20-30% lower cost of housing create advantageous scenarios for both employers and employees. In response to this burgeoning demand, interest from leading real estate developers is anticipated to surge, resulting in an influx of high-quality supply to these markets. The evolution of flexible working spaces within these dynamic centers is expected to address the gap between supply and demand for premium office spaces, marking a new era of expansion and opportunity, according to Vimal Nadar, Senior Director and Head of Research at Colliers India.
Increased digital adoption to drive data center expansion in smaller towns.
Growing digitization is expected to significantly enhance real estate activity in smaller towns, particularly within the data center and warehousing sectors. The ascendancy of e-commerce will facilitate online retailer growth, leading to the establishment of distribution centers, warehouses, and fulfillment hubs in strategic locations. The notable rise in data consumption will further stimulate the growth of data centers and intelligent infrastructure in these emerging locales, rendering them attractive destinations for real estate investments.
Colliers thoroughly evaluated the impact of digitization on real estate, considering metrics such as population growth, GDP per capita, trends in online shopping, adoption rates of digital payments, and the presence of leading retail brands. Cities like Jaipur, Kanpur, Lucknow, Nagpur, Patna, Surat, and Visakhapatnam have been highlighted as key areas poised for upsurge in real estate activity thanks to digitization.
Temple towns are primed for growth spurred by spiritual tourism.
With infrastructure enhancements and supportive government policies as a backdrop, spiritual tourism is likely to significantly influence the growth trajectories of various temple towns in India. Long-term real estate market players may find these spiritual hotspots enticing, thanks to the upgrades in infrastructure and connectivity being brought about by new airports, flagship rail services, and improved roads.
Identifying high-impact sites for spiritual tourism involved scrutinizing various aspects, including sanctioned allotments under government schemes, annual visitor numbers to prominent pilgrimage sites, strategic plans from real estate developers, and the rise in land prices. Cities such as Amritsar, Ayodhya, Dwarka, Puri, Shirdi, Tirupati, and Varanasi have emerged as potential focal points for investment, bolstered by growth driven by spiritual tourism.