Residential Real Estate Booms in Tier-II and Tier-III Cities Amidst Metro Slowdown
While major Indian cities like Delhi and Mumbai grapple with a real estate slowdown, smaller Tier-II and Tier-III cities are witnessing a surge in residential transactions, painting a contrasting picture of the housing market. This trend is evident in the second-quarter earnings of major players like HDFC Bank and Asian Paints.
Financial Indicators Point to Growth in Smaller Cities
HDFC Bank reported a 29% year-over-year increase in personal loans, largely driven by demand from these smaller towns. Asian Paints similarly experienced a substantial 37% jump in net profit, attributed to growth in Tier-II and Tier-III cities. The bank's lending is predominantly focused on middle-income individuals, particularly in the outskirts of larger metropolitan areas. This focus on a specific demographic suggests a broadening of the housing market beyond traditional urban centers. The decorative paints business, a strong indicator of construction and renovation activity, also flourished across India with companies reporting double-digit volume growth.
Market Absorption and Launches Tell a Mixed Story
A recent survey reveals that Greater Noida saw a remarkable 2.3-fold increase in absorption in the second quarter, with 9,823 units absorbed compared to 4,136 units during the same period last year. Interestingly, new project launches in Greater Noida were double last year compared to the current year. In contrast, major cities like Mumbai experienced a 33% decline in absorption during the first half of the year. Bangalore stands out as an exception, registering a 23% rise in absorption alongside a record number of new project launches. The Delhi-NCR region as a whole exhibits a declining trend in supply, even as demand continues to climb.
Affordability and Amenities Drive Demand in Smaller Cities
Developers in metropolitan areas face challenges due to high property prices, which are impacting sales traction. In contrast, homes in Tier-II and Tier-III cities offer significantly greater affordability coupled with an increasing array of amenities. These smaller cities, largely dependent on agriculture and industry, appear less affected by the economic slowdown. This resilience further contributes to the attractiveness of their real estate markets.