Metros continue to dominate Tier-2 cities in residential real estate market

The year 2022, saw maximum residential property sales in the last eight years, with total absorption increasing by 28 per cent year-on-year, according to a recent report

The sales of residential properties in tier-1 cities in India stood at more than 250 per cent of the levels seen among tier-2 cities in the calendar year 2022, according to a recent report by PropEquity, a real estate consultancy firm.
 

The year 2022, saw the maximum residential property sales in the last eight years, with total absorption increasing by 28 per cent year-on-year.
 

The report attributes this increase in sales to multiple factors like a rise in consumer confidence in hard assets compared to volatile assets post-Covid. Lower repo rates of 4 per cent in the first half of 2022, and subsequent increases in the borrowing and lending capacity of commercial lenders because of lowered cost of credit and the increase of liquidity in the financial system also contributed to rising in sales.
 

The total absorption witnessed in tier-1 cities was at whopping 453,000 units as against 183,000 units in tier-2 cities, the report said.
 

In terms of new launches of residential property, the tier 1 cities outperformed the tier 2 cities by more than 240 per cent in 2022. The new launches seen in metros stood at 371,000 unit mark while it was 1.52 lakh units in the latter.
 

If the value (prices) of homes are taken into consideration, then the market share of residential real estate in tier 1 cities is four times more than that in tier 2 cities, the report said.
 

The report highlights that in the calendar year 2022, the market share of the top 9 cities (20 per cent of 44 cities) has witnessed about 80 per cent of new supply. 
 

“This disproportion in metros and tier 2 cities is due to employment opportunities, better infrastructure with a better standard of living in tier-01 cities. Regardless of the size of the real estate industry in the two categories of cities, there are very positive developments and all-round growth of the property market across the country where more and more people are finding a home of their choice and within their budgets. These are healthy signs of a mature real estate in any country,” said Samir Jasuja, Founder and Managing Director at PropEquity.
 

"Rapidly rising property sales in tier-1 cities have shown us that despite challenges, perseverance and innovation always win. With an impressive 2.5 times sales figure compared to Tier 2 cities, it is a testament to the strength of the market and the tenacity of those involved in the real estate industry. This growth is not only a sign of economic prosperity but also a reflection of the trust and confidence people have in the future. It is a reminder that there are always opportunities for success and growth, even in the most challenging of times." Ankush Kaul, Chief Business Officer at the Ambience Group said.
 

According to the report, 2022 witnessed the highest launches and absorption in the last eight years, with absorption crossing 450,000 of residential units with only 370,000 of new supply in the same period. The inventory overhang is at an all-time low with only 12 months of inventory left in top tier-1 cities in India. This gap in inventory will encourage developers to launch new projects in the coming quarters to cater to the existing demand.