Kochi has emerged as the top Tier II city in India thanks to substantial rate of real estate construction and new launches matched by significant sales.
The
city, along with Indore, achieved the highest sales in the year of project
launches, among all the Tier II cities, as per the latest annual report by
PropEquity on top 19 tier II cities of India.
Kochi, proposed to be one of the smart cities
is fast becoming home to emerging software companies. Kochi has also pipped the
state capital Trivandrum, which finished at number 5 in the Prop Equity report.
The
report has thrown some startling revelations in some ways, as no city could
come on top on more than 2 advanced parameters, and in fact most cities, doing
extremely well on some parameters, fared poorly on others. A case in point is
Dehradun, which is top on 2 parameters, while last in other four, and hence,
has fallen in overall ranking. As a result, cities which fared slightly above
moderate on most parameters, excelled in the overall rankings. Cases in point
are Kochi and Nashik.
On a
regional level, it is not just (#1) Kochi, which has done well from the
southern region. The latest report by PropEquity puts all top six Southern TIER
II cities of India in the overall top 10, with Vishakapatnam at #3, Trivandrum
at #5, Mangalore at #7, Goa at #9 and Coimbatore at #10.
Kochi
is followed by Nashik at #2 and Vadodara at # 4, both from Western India.
Regionally, South is at the top, followed by West and Central India. North
India finds itself at the bottom.
Overall,
the top 6 cities have achieved very close cumulative numbers (in range of 12.3
to 13.6), based on which rankings have been calculated. Consequently, these
cities are collectively looking worthy, rather than standing way apart from
each other.
The
top 10 rankings consist of 6 cities of South India, 2 from West India, and 1
each from Central and North India Only one city from Northern India, Jaipur,
came in the top 10 with sixth rank. Much like TIER I cities report which was
released recently, TIER II cities from North are also marred by project delays,
expensive properties and a demand and supply mismatch.
“Kochi
has done relatively well on several parameters including absorption in new
launches, construction, committed to construction completed, and CAGR of
absorption. These reasons helped the city attain the top rank in our study.
Although the Tier 2-3 cities have performed better in India, they too have been
adversely affected during this current slowdown, which has severely impact the
tier I cities,” Mr. Samir Jasuja, MD and Founder at PropEquity said.
Top 10 cities in the list are-
1) Kochi
2)
Nashik
3)
Vishakapatnam
4)
Vadodra
5)Trivandrum
6)
Jaipur
7)
Mangalore
8)
Indore
9)
Goa
10)Coimbatore
Ten
key parameters have been taken into account to generate the rankings, including
the price, supply, absorption, inventory, and new launch trends. The study has
also looked at execution delays and the size of the market in value terms.
The
bottom four cities in the complete ranking Agra, Lucknow, Bhiwadi and Mohali
are all from the Northern region.
Interestingly
the 19 TIER II cities (consolidated) have a total market size in terms of
annual primary sales of INR 326 Billion annually,which is lesser than the
market sizes of Bengaluru (at INR 361 Billion) and Mumbai ( at INR 341 Billion)
respectively.
Overall,
the new residential supply in the top 19 TIER II cities has fallen by an overwhelming
64% in the last two years, as against a fall of 40% in top 14 TIER I cities, in
the same period.
Residential
absorption in the 19 TIER II cities has fallen by 17% in the last two years, as
against a fall of 32 % in the top 14 TIER I cities, in the same period. The
TIER II markets are clearly end user driven than investor driven.
The
launch prices of tier II cites increased at an annual rate of 9% over a period
of 2 years compared to 10% for TIER I cities.
Southern
cities have proven to be resilient, and their conservative nature in even
better times actually has helped them sustain traction in the troubled times
that the industry is going through.
Report Summary:
SOUTH INDIA
•Southern
India has traditionally been an end user market, which has kept its realty
prices in check and relatively affordable.
•
All 6 cities of South India have ranked amongst the top 10.
•
Kochi bags the top position because of its superior connectivity, economic
activity, project delivery track record, and low inventory
•
Kochi is also a proposed smart city with several emerging software hubs and
manufacturing industries. The influence of the Non Resident Keralites has also
kept the demand ticking in this port city.
•
Kochi has seen the highest absorption in new launches at 39%, a critical
indicator of healthy demand in any real estate market.
•
Barring Coimbatore, all other top south Indian TIER II cites have inventory in
the range of 15 to 22 months, which is well within the comfortable level of 24
months.
•
Unsold inventory in Coimbatore remains high at 28 months. Yet the city makes it
to the top 10, as the second largest producer of software in Tamil Nadu, after
Chennai.
WEST INDIA
•
Gujarat is developing at a rapid pace because of its commitment to
infrastructure development, triggering growth in its Tier II cities.
•
Vadodara stands way ahead of all other TIER II cities in terms of absorption,
clocking an average of 12,500 units or 16% of the overall absorption in TIER II
cities. These sales have resulted in Vadodara clocking INR 43 Billion sales.
•
The weighted price of absorbed units in Vadodara stands at INR 2,322 psf,
making it highly affordable. This also makes it the second lowest figure
amongst the TIER II cities.
•
Mumbai-Vadodara Expressway has also been planned which will further boost
prices in Gujarat. Budding social infrastructure in Vadodara and Nashik, is
drawing many investors from neighboring cities like Pune and Mumbai.
•
Gandhinagar is worth a mention because of the lowest delays in execution of projects.
At 8 months it is almost half of average delay of 15 months of all the TIER II
cities.
•
The cities considered in the Western region have the lowest average delay of 9
months for execution. Surprisingly, the TIER II city developers in the western
region are showing more commitment to execution than their TIER I counterparts.
CENTRAL INDIA
•
Nagpur is fast emerging as a strategic hot spot with developments like the
upcoming rapid transit, Nagpur Metro and the MIHAN project. The fully
functional Nagpur international airport is also a big positive for the city.
•
Slowdown is now visible in Bhopal with absorption falling by 38%. The increase
in government levied taxations and certain legal judgments passed on the real-estate
sector, are impacting the housing market. Raipur has also not done too well,
with a 36% fall in absorption over last year.
• Surprisingly though, despite falling demand,
Bhopal witnessed the maximum launch price increase among TIER II cities, with a
CAPR of 23%. This rate of increase is higher than that witnessed in other TIER
II cities.
•
Central India has the lowest average absorption prices of all the regions, that
is 15% less than the national average, at INR 2,538 per square feet.
NORTH INDIA
•
North India is the worst performer amongst all regions, performing below par on
all the evaluated parameters.
•
Three of the top four cities in terms of inventory overhang belong to north
India, with Mohali leading with 50 months of inventory.
•
Dehradun (23 months) is the only city from the North with inventory overhang of
less than 24 months.
•
Investors are shying away from this market due to price stagnation and
disappearing returns on investments. End-users are waiting for the prices to
further correct.
•
Northern region has emerged as the second most expensive destination among TIER
II cities, with the weighted average price being INR 3,000 per square feet.
About PropEquity:
P.E.
Analytics owns and operates PropEquity which is an online subscription based
real estate data and analytics platform covering over 45,000 projects of 8,200
developers across over 40 cities in India. We add approximately 500 projects
every month. It is a premier Business Intelligence product- a first of its kind
in India in the Realty space.
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