Purchasing property? Know why non-metro cities can be your best bet

Non-metro real estate surge: Considering a real estate investment? Non-metro cities might just be the perfect opportunity, experts suggest. Non-metro cities across India are emerging as prime investment destinations, getting attention from developers and investors alike. 

Experts observe a surge in land acquisitions, especially in tier-2 and tier-3 cities, indicating robust growth and promising investment opportunities in these regions.

"Leading real estate developers have secured approximately 1,461 acres of land for residential projects over the past 22 months in non-metro cities. This activity reflects a growing trend towards affordable living spaces as India prepares for a projected urbanisation rate of 50 per cent by 2050," Pyush Lohia, Director, Lohia Worldspace told Republic Business. 

Cost-effective real estate

Analysts suggest that non-metro cities offer lower acquisition costs and construction expenses, making them attractive for real estate investments. 

"Historical data points to potential returns on investment (ROI) ranging from 8 per cent to 12 per cent annually, contingent upon various factors including location and market conditions," said Gunjan Goel, Director, Goel Ganga Developments.

Younger professionals and families are moving to these areas due to affordable living costs and improved quality of life, driving the demand for residential properties.

Top investment destinations

Several non-metro cities are standing out as hotspots for real estate investment. Chandigarh, Ghaziabad, Agra, Dehradun, and Lucknow are noted for their strategic locations, commercial activities, and proactive government policies promoting development. 

Coimbatore and Pune are also highlighted for their rapid industrial growth and infrastructural advancements, which are driving demand for both commercial and residential real estate.

Urban growth drives value

Non-metro cities have seen substantial increases in property prices, often outpacing those in metro areas.

Reports suggest that property values in these regions have grown by 10 per cent to 15 per cent annually, highlighting the attractiveness of these markets for long-term investments. 

The rapid urbanisation and improved infrastructure in these areas are key drivers of this growth.

Rental yields in non-metro cities are generally higher than those in metro areas, driven by stronger demand-supply dynamics. 

The influx of businesses and new economic activities in these regions has spurred demand for both residential and commercial spaces, resulting in competitive rental markets.

Commercial spaces surge

Commercial real estate sectors such as retail, office spaces, and hospitality are expanding in non-metro cities. 

Commercial real estate in India is booming, and its market size, which is currently estimated to be $ 40.71 billion (2024), is expected to grow at a CAGR of 21.10 per cent and reach $106.05 billion by 2029 as per a Mordor Intelligence report.

"The sub-sectors that will witness high growth include retail, office, and hospitality. Another promising area is warehousing and logistics, driven by the expansion of e-commerce and the need for efficient supply chain networks. Moreover, healthcare infrastructure is gaining traction, with rising demand for quality medical facilities in non-metro regions," Lohia added.

City upgrades drive investments

Infrastructure improvements and government initiatives are important in transforming non-metro cities into viable real estate markets. 

Projects such as new roads, highways, and public transport systems have enhanced connectivity, boosting economic growth and attracting investments. 

A Mordor Intelligence report estimates the real estate market size in these regions will grow from $0.33 trillion in 2024 to $1.04 trillion by 2029, fuelled by extensive infrastructure development.