India will urbanize to approximately50% by2050, with the focus of real estate growth shifting to second-tier cities: Report..

According to a report published by Cushman and Wakefield and the Confederation of Real Estate Developers' Associations of India (CREDAI), the country is expecting an urbanization rate of about 36 percent this year and 50 percent by 2050. As a result, the focus will shift to second-tier cities such as Bhubaneswar, Coimbatore, Indore, Jaipur, Kochi, Lucknow, Nagpur, Surat, Thiruvananthapuram, and Visakhapatnam, which have advantages and development potential to become the next promising destinations for the real estate sector. The report was presented on October 6 during the 21st National Conference of CREDAI in Sharm El Sheikh, Egypt.

21st National Conference of CREDAI

Organized in Egypt, it is the largest annual regional real estate conference in Asia, gathering over 1,400 delegates. Over the course of two days, the conference will feature discussions and debates on various aspects of real estate, including technological innovations, commercial real estate, growth centers of the second, third, and fourth levels, and more.

Although Delhi, Mumbai, Bangalore, Pune, Hyderabad, Chennai, Kolkata, and Ahmedabad continue to be the leading eight real estate markets, the report predicts that these 10 second-tier cities will soon become even stronger contributors to India's growth, driving the country's development forward.

The selection of cities was based on indicators such as population, infrastructure, human resources potential, income, quality of life, and housing availability, according to the report.

The report highlights how increasing urbanization is putting pressure on the existing infrastructure in first-tier cities as they try to meet the growing demand for quality housing. The country is rapidly urbanizing, with the urbanization rate rising from 32 percent in 2013 to about 36 percent in 2023, which redirects attention to markets that have advantages and development potential for the real estate sector, the report states.

"As India continues its path of economic growth and faces increased urbanization, we anticipate that new cities will become the engine of future growth in the commercial real estate market. We believe that this report will be invaluable not only for corporate tenants exploring alternative locations outside the eight largest real estate markets but will also provide developers with insights into the opportunities that exist in their own areas," said Boman R. Irani, president of CREDAI.

“The report provides valuable practical insights into the country's growth, with the real estate sector being one of the key driving forces. We expect to become the fastest-growing major economy and reach a $5.0 trillion economy by 2026-2027. However, to achieve our ambitions, it is becoming increasingly clear that we need to accelerate the pace of economic growth and create more megacities.

The rising levels of income and consumption have made second-tier cities a magnet for retail investment. As high-end shopping malls and prestigious shopping streets develop, India's second-tier cities are transforming into major consumer hubs, a trend that is likely to gain momentum in the coming years. The housing sector has also seen significant growth in many of these cities, and they are performing well in terms of housing affordability, the report notes.

Manohar Gaur, the chairman of CREDAI, stated in his opening speech that now is the best time for the real estate sector, provided it does not repeat past mistakes... The sector must be accountable to its clients and all stakeholders and take new technologies into account.

The report takes into account parameters such as population, economic potential, and the attractiveness of cities in terms of commercial real estate to identify emerging cities.

In addition, higher weights were assigned parameters such as the number of students in higher education institutions, population size, and living comfort level, as these are the most important reasons for corporate clients to relocate to a new place. Overall, the report focuses on infrastructure and connectivity as the key factors in commercial activity today.

As part of the research, data on metro development was also taken into account, including the existing metro routes (in kilometers), as well as those under construction and planned. Other indicators include population growth (over the last period), housing prices (to assess the affordability of quality "A" class projects), and GDP per capita (to evaluate consumption potential or discretionary spending), all of which potentially provide a 360-degree view of the real estate market development in selected second-tier cities.

Cushman & Wakefield India selected 17 cities representing all regions of India based on their economic size, the current state of commercial real estate (offices and retail), the level of tenant interest, as well as internal on-site research.

Then, 17 cities were analyzed using a detailed rating table, employing parameters that reflect their market size (population) and growth, livability, infrastructure, availability of the labor pool, income, and housing affordability. We believe that these parameters effectively cover a set of factors that corporate tenants or retail brands would consider before deciding to enter a city. Additionally, some of these parameters are also useful for migrants who are contemplating a move to the city.