Rising per capita income and growing social infrastructure in Tier II and III cities.
The Covid-19-led economic deceleration has been catastrophic for most sectors, barring a few. Despite of slowdowns in consumer spending, low manufacturing output, and global instability, India still remains the world’s fastest-growing economy. According to Kearney Research, the retail market is expected to reach $1.5 trillion by 2030, from $0.8 trillion in 2020, manifesting the strong consumption power of over a billion Indian consumers, as they migrate upwards in the income pyramid.
Tier-II cities in India are thriving in the post-pandemic world, led by their growing economic significance, infrastructure development and consequently, improved connectivity and real estate growth, as per a CBRE research report, titled ‘Tier-II cities: Coming of Age’.
These cities are poised to be the new growth vectors in India in the coming years – driven by their progress in the real estate landscape, work environment, quality of life, and sustainability. These cities are large talent bases, and taking offices closer to talent holds the potential to be alternative centres of growth, fuelling innovation and growth for office occupiers. Hence, it is increasingly critical for these cities to sustain the current pace of infrastructure development and strengthen skill development.
Relocation of industry and housing hubs to smaller cities
A number of industries in the service sector has relocated or expanded to tier-II and tier-III cities, including Chandigarh, Jaipur, Lucknow, Bengaluru, Ahmedabad, Hyderabad, Bhubaneshwar, Pune, Jaipur and Trivandrum. The growth of housing hubs in these areas has also resulted in the growth of large numbers of malls that allow retail space to investors.
Government investment in infrastructure and rural development
The government is investing in infrastructure, rural development, and public health, ensuring a more robust retail environment, and simplifying policies. Retail growth outside traditional metro areas is exploding. Sales in tier-I cities have been declining, with 8 per cent per capita trade activities and GVA growth intier-11 markets and 10 percent growth in tier-III, -III, and -IV cities.
Cheaper rental and land cost
Availability and cost of retail space is other major consideration in the development of organised retailing. Prime locations in tier-II and -III cities are 30 cheaper than their counterparts in the metros. Larger chunks of land are also available in these cities compared with metros, and at a lower cost.
Shift in consumer buying patterns
India’s thriving and growing retail sector is in large part driven by higher disposable incomes, urbanisation, and middle-class lifestyle changes. The concept and idea of shopping has undergone a massive transformation in terms of format and consumer buying behaviour. Shoppers today prefer bustling centres, huge complexes, and multi-storied malls that offer shopping, entertainment, and food – all under one roof. Many consumers in smaller cities have aspirations to buy branded products and their ability to afford them is increasing. This is helping malls generate good revenues.
