With property prices overheating in the top eight 'A' grade realty markets (Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Kolkata, Pune and Ahmedabad), 11 tier two cities have caught the attention of investors as future growth areas.
These cities are likely to witness a spate in construction activities and the shift from established markets to emerging locations has already begun.
Consultancy firm Ernst & Young in its recent city ranking exercise has identified 11 new markets categorised as 'B' cities, which hold maximum potential for investors.
In its latest survey Ernst & Young has named six cities including Surat, Chandigarh, Nagpur, Vishakhapatnam, Vadodara and Jaipur as the emerging cities. Close on the heels are Thiruvananthapuram, Kochi, Nashik, Indore and Ludhiana.
"As the focus of economic growth shifts to smaller emerging cities, there is a greater need to access the potential of the next set of cities which are expected to emerge as future battlegrounds," the report titled Indian Real Estate: Growth and New Destinations said.
Surat, the fastest emerging industrial and economic cluster in western India, is likely to witness massive economic growth. It would witness influx of international companies and professionals. The proposed expressway linking Mumbai and Surat and the upgraded airport is likely to give a boost to the economic activities and real estate in the city. Last year had witnessed significant rise in land transactions in "The Silk City" with price appreciations of more than 35 per cent in most localities.
Meanwhile, Chandigarh has the potential to emerge as a knowledge city. With several global and Indian technology and R&D companies planning to set up bases and rapid influx of professionals to the city expected to drive the demand for real estate across asset class, the report said adding the city, 240 kms away from Delhi, has already witnessed a boom in real estate with land appreciation of almost 200 per cent in certain areas.
Nagpur, known as the city of Oranges has emerged as the next most preferred location for IT/IteS companies in Maharashtra after Mumbai and Pune. Increasing interest of investors has led to an upsurge in real estate activity in the city. "Areas close to MIHAN project have a strong investor interest and prices have gone up by 250-300 per cent in the area over the last 18 to 24 months. The demand for residential properties has led to a rise in property prices. An over supply situation is predicted in the retail segment," the report said.
The port city of Vishakapatnam is likely to attract investment in the areas of logistics, health tourism and educational hubs. Land prices have appreciated by 200 per cent.
If Vadodara is a potential biotechnology hub, the relative low cost of land in Jaipur is set to encourage national developers to foray into the city.