[ecis2016.org] On the property market landscape, most of the commercial developments in the major Indian cities have thus far been confined to tier-1 cities.
Rajesh Prajapati is a real estate agent, operating mostly in and around areas of Khushkhera, Bhiwadi and Neemarana in Rajasthan. As he deals primarily in residential and industrial real estate, it has always been a challenge for Prajapati to get investors and buyers in these high-potential but nondescript locations.
You are reading: Industrial corridors to boost commercial realty in tier-2 and tier-3 cities
Many times, he thought of shifting to the NCR market for greener pastures. However, for the last year or so he has been witnessing unusual interest from investors in the region. Has urban sprawling extended deep beyond the lucrative NCR territories? The answer is yes, and the reason behind is the upcoming industrial corridor.
“There had been some initial demand in and around the areas that connect with the Delhi Mumbai Industrial Corridors (DMIC). However, nowadays there is demand for commercial properties in even areas that could be termed as secondary business districts of the region. Earlier, there was no concept of central business districts and secondary business districts in the region. It seems the DMIC is changing the commercial landscape of the area,” says Prajapati.
The experience of this property agent in Rajasthan’s tier-2 market is no different from that of many other property agents across the tier 2 and tier 3 cities that connect various upcoming industrial corridors.
Impact of industrial corridors on commercial realty in tier-2 and tier-3 cities
On the property market landscape, most of the commercial developments in the major Indian cities have, thus far, been confined to tier-1 cities. This had a direct bearing on the uneven growth of economic activity and the commercial developments. The ground realities on the economic activities in general and the development of spaces for the same in particular have been pretty confusing.
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For example, Mumbai is probably the only city in the world where the best of commercial spaces are much cheaper than the best of residential apartments, thanks to the over-supply of commercial spaces.
The demand for commercial properties beyond Mumbai has been pretty discouraging. However, this uneven growth of the economy is soon going to change with what is being referred to as the passage of prosperity. The upcoming industrial corridors, it is believed, will redefine the urban growth pattern in this part of the world, open the floodgates of growth and economic opportunity and the commercial property market will see new growth corridors of development.
Main industrial corridors in India
There are four main industrial corridors that are likely to have the maximum impact on commercial property markets:
- The Delhi-Mumbai Industrial Corridor (DMIC), which is also the most talked about corridor.
- The Chennai-Bengaluru Industrial Corridor (CBIC).
- The Bengaluru-Mumbai Economic Corridor (BMEC).
- The Amritsar-Delhi-Kolkata Industrial Corridor (ADKIC).
In addition to these, real estate developers are also eagerly awaiting the proposed East Coast Economic Corridor, linking Kolkata to Chennai, to open more floodgates of economic opportunities.
The industrial corridors are all about trade and commerce, manufacturing and economic activities, with hassle-free movement and policy incentives. Hence, it will facilitate the movement of goods and people between cities and reduce the time taken to ply goods between two cities. The industrial corridors will, hence, enhance business opportunities for the people of the states. There will be decongestion in all the states and Small and Medium Enterprises (SMEs) will grow along the stretch. Since the SMEs are one of the key demand drivers of commercial property in India, it will lead to a boom in demand for commercial spaces, which will have a spillover effect on the demand for residential properties, as well.
Reasons for spike in demand for commercial spaces in tier 2 and 3 cities
There definitely is a method in the madness behind the spike in demand for commercial property in tier-2 and 3 cities that connects the industrial corridors.
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To start with, the cost of doing business per sq ft is nearly 40% to 50% lower than the commercial spaces of tier-1 cities.
Secondly, small and medium enterprises that are part of the supply chains to the large businesses along the industrial corridors can sustain their operations at the periphery locations of industrial corridors.
Thirdly, logistics and warehousing will emerge as the investment magnet along the periphery locations of industrial corridors. Similarly, manufacturing units are scouting for commercial spaces to reap the early mover advantage in tier-2 and tier-3 cities.
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Last but not the least, tier-2 and 3 cities did not have their own engines of commercial activities. Transportation cost has always been a challenge for the businesses. However, the connecting point now is the industrial corridor that makes the business sustainable for small and medium businesses.
In a nutshell, the landscape of commercial property along tier-2 and tier-3 cities would be redefined in the days to come. The industrial corridors have already attracted the attention of investors and the early movers are scouting for lucrative deals. Some of the big ticket investments being negotiated for commercial spaces along these smaller cities by global funds, could result in a tectonic shift in the way commercial properties in tier-2 and 3 cities were being envisioned.
(The writer is CEO, Track2Realty)
Source: https://ecis2016.org/.
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Source: https://ecis2016.org
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