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Buoyant residential realty drives land deals; non-metros too catch momentum

The ongoing resurgence in the residential real estate market has prompted property developers to actively pursue and conclude transactions for land parcels, and the trend is not limited to metropolitan regions and peripheral locations but is also evident in tier-II and -III cities, too.

Homebuyers’ interest in plotted developments has spiked, particularly after the outbreak of the Covid-19 pandemic. The buoyant demand for warehousing has also pushed finalisation of land deals higher.

During the 22-month period from January 2022 to October 2023, real estate developers purchased about 3,294 acres of land. A substantial proportion, or 44.4%, of these land deals was transacted in tiers II and III locations, with 1,461 acres being acquired in 17 land deals, according to a JLL India study.

“The Indian economy is undergoing transformation, and the growth is visible not only in metro cities but also in tier-II cities and towns. We are looking to create wealth for our consumers with land offerings across such towns and cities of ‘new India’ that have been embraced by seminal infrastructural proliferation, development, and connectivity, making these cities meaningful centres of commerce,” said Samujjwal Ghosh, chief executive of The House of Abhinandan Lodha (HoABL).

Cities such as Nagpur, Palghar, Khalapur, Panipat, Ludhiana and Panchkula have collectively contributed around 75% to the total 1,461 acres of land acquired in tiers II and III locations.

“Strategic land acquisitions by real estate developers in Tier-II and -III cities to enter new markets and leverage the rising demand for quality projects is on the rise. The trend of launching plotted developments and low-rise apartments is specifically prevalent in these cities,” said Samantak Das, chief economist and head of research and REIS, India, JLL.Established real estate developers are now targeting new markets by entering tier-II and tier-III cities. According to the data, branded developers have closed many land transactions in these cities as a result of rising customer demand and buying power.Robust response to recent projects in this segment by listed developers including HoABL, Godrej Properties, Mahindra Lifespace Developers and Arvind Smartspaces validates the trend.

“Affinity to own land also increased post-pandemic. The built-to-suite feature in the plotting segment provides additional flexibility to consumers. For developers, large horizontal developments present both opportunities and challenges. Besides complex land aggregation and regulatory challenges, this product segment needs long-term vision and conviction,” said Kamal Singal, managing director & CEO at Arvind SmartSpaces.

According to him, the segment provides better returns in the medium and long term due to the benefits of scale and greenfield infrastructure development.

As much as 91.6% of the land acquired in tier-II and -III cities, or 1,339 acres, is for residential developments, with the majority being planned as plotted residential developments. Developers are primarily focusing on low-rise and plotted developments in these cities, as the locals are accustomed to living in these types of formats.

In fact, around 1,015 acres, valued at over Rs 3,163 crore, have been earmarked for plotted developments. Some developers are also planning to launch holiday homes as people in metros are looking for second homes in vacation destinations like Shimla, Rishikesh, Goa, etc.

Buyers too are looking to purchase quality homes in tier-2 and -3 cities. Established real estate players entering these cities have enhanced buyer confidence, as these developers have a good track record and strong execution capabilities, along with access to institutional capital.


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