Authored by – Nandni Garg, Director, Rajdarbar Ventures
Tier 2 and tier 3 cities have emerged as new frontiers of growth. One major force driving this trend is the strong demand for plotted development, which is further fuelled by developers looking for new growth opportunities outside the overcrowded and high-cost markets of major cities.
According to a recent CREDAI report, the demand for housing in India is projected to reach a staggering 93 million units by 2036. To meet this demand, developers are turning their attention to tier 2 and tier 3 cities, where the appetite for upscale plotted development is on the rise. Unlike the major cities, where high-rise apartment complexes have become the norm, these smaller cities are witnessing an increase in interest in plotted developments.
In the fiscal year 2023-24, as per an Anarock report, the real estate sector executed a significant shift in land acquisitions across the country. Of the 101 land deals totalling approximately 2,989 acres, 18 deals for 1,853 acres were closed in tier 2 and tier 3 cities like Ahmedabad, Ayodhya, Mysuru, and Surat. These deals primarily cater to residential and plotted development projects. It signalled a strategic move by developers to capitalise on the untapped potential of these growing markets.
Appeal of Tier 2 and 3 Cities
Tier 2 and 3 cities are emerging as key growth engines for the real estate sector, driven by improved infrastructure, enhanced connectivity, and a growing middle class with rising aspirations. As a result, developers have strategically expanded their footprint in these cities and acquired over 1,461 acres of land in the last 22 months, with a significant portion dedicated to low-rise and plotted residential formats.
The trend particularly gathered pace after the pandemic, which played a crucial role in reshaping housing preferences across the country. The need for more spacious and independent living arrangements has led to a growing preference for plotted developments, particularly in tier 2 and 3 cities where land is more affordable and available in larger parcels. The desire for low-density housing, coupled with the benefits of owning land, has made plotted developments a preferred choice among buyers. Many plotted developments in these cities are conceived as part of larger township projects, which offer residents a self-sustained living environment.
As major cities continue to grow vertically with high-rise apartments dominating the skyline, tier 2 and tier 3 cities are carving out a new frontier in real estate with plotted developments. For developers, this represents a significant opportunity to tap into the growing demand for low-rise, plotted housing in markets that are ripe for expansion.
The rise of plotted development in India’s smaller cities is not just a trend but signifies the evolving dynamics of the real estate sector. As developers and homebuyers alike embrace this shift, tier 2 and tier 3 cities are poised to play a pivotal role in shaping the future of housing in India.