Housing demand, which hitherto has remained dominant in the top 8 cities of India, is gaining momentum in Tier II & Tier III or ‘shadow cities’ with the trend becoming more prominent post the nationwide lockdown according to Housing.com.
As per the Think Piece titled ‘Time for Internal Globalisation – Small Cities Setting the Tone for Revival’, the online platform observed a surge in virtual residential demand from ‘shadow cities’ (Tier II & III cities). The recently launched Virtual Residential Demand Index states that the demand from small cities had been increasing steadily but saw a significant spike in August 2020. Overshadowing the metros, the index jumped to 210 points for ‘shadow cities’ compared to 150 for the metros post the nation entering into Unlock Phase 4.0
Reverse migration of the corporate workforce and increased flexibility due to remote working is one of the key drivers cited for this surge in virtual residential demand.
|Growth over pre COVID (Oct 2019 to March 2020 Vs post March to uptil now)|
|Cities||Growth over |
|* PreCOVID period – October 2019 to March 2020|
The report noted that, though development in ‘shadow cities’ has moved at a snail’s pace, the current pandemic driven crisis, has brought structural changes, which has notably accelerated the process of deeper market penetration in ‘shadow cities’ across sectors. Driven by the thrust of increasing digitisation, and an aspirational consumer cohort in the ‘shadow cities’, these cities now are exhibiting a readiness for big brands across the categories of fashion, luxury cars, jewellery and real estate among many others.
The disruption in the economy and job uncertainty caused by the coronavirus pandemic led to a significant ‘reverse migration’ of the population — both informal migrant population and employees in the formal service sector who have either lost their jobs or are working remotely.
“This reverse migration, with workforce moving back to their hometowns or smaller cities is one of the key drivers that is rallying the growth of not only the e-commerce platforms but is also surging the online search traffic for buying and renting residential spaces in the ‘Shadow Cities’,” the report said.
“On our Housing.com platform during the last few months, we have seen a noteworthy increase in interest levels for residential properties especially from non-metro cities such as Amritsar, Chandigarh, Vadodara, Nagpur, Vijayawada and Coimbatore,” said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com & PropTiger.com.
“Our ‘Virtual Residential Demand Index’ shows this trend more saliently post May 2020,” he added.
“The interest in the smaller cities has been gradually increasing and the share increased to 27 percent in the first half of 2020, as compared to 18 percent in the same period in 2019,” the report said.
Cities such as Agra and Amritsar witnessed an impressive growth of more than 100 percent in the virtual residential demand over pre-COVID times, while cities of Vadodara, Ludhiana, Mangaluru, Chandigarh and Lucknow saw more than 80 percent growth in residential demand in the same period. In contrast, the top 8 cities have witnessed a relatively lower growth in virtual demand for residential spaces over the Pre-COVID period.
Going forward, Agarwala said “reverse migration driven by remote working could have “powerful reverberations” on the future of residential demand.”
Views from Industry veterans on demand uptick:
Mr. Balbir Singh Dhillon, Head, Audi India
“With an increase in disposable income and aspirations of owning global brands, the contribution to volumes is increasing steadily from smaller cities. We also see a positive trend of customers from smaller cities, who have an appetite for performance and lifestyle cars with new body styles. At Audi India, our focus has always been on expanding to Tier-2 and Tier-3 cities. These regions exhibit rising aspirations to own luxury cars. Under our ‘Workshop First’ strategy, we enter Tier-2 and Tier-3 cities with a ‘Service First promise’ by inaugurating a workshop first, a gradual plan to establish a showroom follows. Living our ‘Workshop First’ approach, we have opened gates to our state-of-the-art workshop facilities in Thane, Vijayawada, and Trivandrum, reaching closer to our customers. We will continue to expand this as per market demand. In addition, we also have seven Audi Approved; plus showrooms; our plan is to double this as per market demand.”
Ashwini Kumar Tewari, Managing Director and Chief Executive Officer, SBI Card
“The credit card penetration in India on an overall basis is only 3 per 100. This number will be even lower in Tier 2 and 3 cities as traditionally most lenders were cautious about lending in these pockets on account of less awareness of credit culture, less acceptance infra like POS and lack of collection infrastructure. The Demonetisation, Government Digitisation initiatives and growth of e-commerce has changed these.
There is a lot of potential in Tier 2 and 3 cities and the customers are now actively seeking credit (credit cards as well as personal loans). In the last quarter, as per Credit Bureaus, the Rural and Semi Urban markets share in the overall new trades increased and the Metros decreased.
SBI Cards has always had a strong focus on Tier 2 and 3 markets in line with the customer base of SBI. Almost 40 percent of our Portfolio is from Tier 2 and 3 cities, additionally, in terms of new customers, the trend is even higher. The credit performance of Tier 2 and 3 cities is 10–15 percent better. SBI Cards plans to focus on increasing its market share in these cities.
Suvankar Sen, CEO, Senco Gold and Diamonds
“Tier 2 and 3 cities is the Bharat side of growing India and during the COVID-19 situation, we see a large middle-class customer base appreciating their smaller towns, a protective cocoon in the world of uncertainty. Senior citizens or families moving back to Tier 2 and 3 cities, migrant labourers moving back home to their Tier 2 and 3 cities and urban centres decluttered and less polluted. We have seen less degrowth in Tier 2 and 3 cities, more optimism and positive thoughts in smaller shadow cities compared to major urban centres. Thus, the hope for future growth in countries and development opportunities lies in the shadow cities.
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