News: Tier-III cities set for rapid growth

(BS 23/11/2006) Kolkata - The tier III cities of India are poised to emerge as one of the most preferred investment destinations for global realty and investment firms and is therefore likely to be transformed over the next three to five years.

These locations would include Jaipur, Coimbatore, Ahmedabad and Lucknow.

According to property sector surveys, availability of the requisite talent pool coupled with low cost real estate, there would be a growing interest in tier III cities from the technology sector players who seek to expand their operations into these previously untapped locations.

Based on the current and expected growth potential, various locations in the country can be classified as mature destinations, destinations in transition and emerging destinations.

Locations like Mumbai and Delhi can be classified under mature destinations.

With their metropolitan character, Mumbai and Delhi have been traditional business destinations and have a favourable track record in attracting investments.

However, factors such as increasing operating costs, real estate supply constraints and socio-political risks are the potential impediments in sustaining a high rate of growth.

Commercial real estate growth in Mumbai and Delhi is expected to be range-bound and focussed mostly around the suburbs and peripheral locations in the coming years.

On the other hand, Bangalore and Gurgaon could be classified under destinations in transition category as they offer a large captive human resource potential, availability of quality real estate and operating cost advantages.

These are locations that are best positioned to attract investments in the coming years.

However, infrastructure bottlenecks form the main hurdles in their growth path.

Emerging destinations in the real estate market comprise Pune, Chennai, Hyderabad and Kolkata.

Growth in emerging destinations can be attributed to cost-advantages, well-developed infrastructure, limited real estate supply constraints and city governance.

Growth of these locations is also led by expansion and consolidation of corporates in the IT and ITeS sectors.

Though the number of large occupiers in these locations are yet to reach optimum, these locations feature predominantly on the investment map.