Price stability and growth prospects of smaller cities are attracting large real-estate developers, who are diversifying from metro cities with an eye on future growth, said a Crisil research report. The report said affordability in smaller cities is greater as prices have not risen as much as in the large cities.
According to the report, prices increased only by 10-12% in the smaller cities over the two years up to April 2011 while in large cities prices rose by 25-30% in the same period.
The report has estimated the sales of new residential apartments in ten such smaller Indian cities at around Rs 18,000 crore in 2012. The cities include Bhopal, Bhubaneswar, Coimbatore, Indore, Jaipur, Lucknow, Nagpur, Surat, Vadodara and Visakhapatnam.
“In contrast, prices are likely to increase only in four of 10 large cities–Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai, National Capital Region and Pune,” said the report.
“The proportion of buyers taking home loans is relatively lesser in these smaller cities. A gradual increase in penetration of home loans would boost demand. Moreover, a shift in preference from independent houses to apartments will also support volumes,” said Prasad Koparkar, head, industry and customised research, Crisil Research.
The growth prospects in the smaller cities are attracting large developers with multi-city presence. A few large developers already have a presence in Bhopal, Lucknow, Indore, Jaipur, Nagpur and Coimbatore. Many of the developers are building land banks in these cities.