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Economictimes,

2 DEC, 2011, 06.58AM IST, KAILASH BABAR & SOBIA KHAN,ET BUREAU
Realty gains ground beyond metros as demand in tier II & III cities holds up

MUMBAI/BANGALORE: The industrial town of Rudrapur, 220 kms from Delhi on way to Nainital, isn't exactly the kind of place that you start talking about. But Sanjeev Srivastav, managing director of real estate developer Assotech, won't quite agree.

He's got a lot to talk about this little town, and is happy his firm had launched a project in this tier-III town four years back. At a time when builders in metros and tier-I cities are staring at falling sales and rising supply, tier-II and tier-III cities are doing quite well - both in terms of demand and prices.

Rudrapur, for instance, has seen prices appreciating by more than 80% in the past three years, something even Mumbai - the hottest property market in the country - has not managed during this period. And if you do a quick scan of the tier-II and tier-III cities, you will find many such Rudrapurs, which are showing steady price appreciation, even as affluence and economic growth trickle down to smaller towns.

Moderate income class is growing in these cities. Their aspirations are now well supported by expanding credit availability, even if non-subsidised, and relatively lower land prices; all of this is helping smaller property markets to remain stable," said RV Verma, chairman and MD of National Housing Bank, the housing finance regulator.

In fact, demand in cities like Bhopal, Faridabad, Lucknow, Bhubaneswar, Ahmedabad and Surat is still holding up and rates are showing an uptrend, unlike in metros where sales numbers are pretty dismal with most builders resisting any correction so far. Property prices in Bhopal and Faridabad have jumped nearly 25% in the past one year; rates have also gone up in cities like Lucknow, Ahmedabad and Surat. This was revealed by NHB Residex, the residential pricing index, maintained by the National Housing Bank.

"These cities will not fail you, returns here are stable and much better than metros over the long-term," said Srivastav of Assotech, that has several projects in Delhi and the National Capital Region ( NCR). "Speculative elements come into picture in larger markets like Mumbai and Delhi, while in tier-II and III cities there's no speculation. This helps in stable and steady price appreciation than volatile price movements," said Lalit Kumar Jain, national president of Confederation of Real Estate Developers Associations of India (CREDAI).

This growth in tier-II cities and smaller towns can be attributed to rising investments across industries including information technology and ITES, rapid industrialisation and opportunities arising out of it and improvement in infrastructure and urban governance.

Link:Realty gains ground beyond metros as demand in tier II & III cities holds up - The Economic Times