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Construction : Web Exclusive | May 2013 | Source : Construction Update

Real estate firms eye smaller cities

According to a report by India Ratings, launching real estate projects in tier-II and -III cities makes them more affordable than projects in tier-I cities.

The report points out that developers would continue to focus on affordable housing and increasingly shift to tier-II and tier-III cities in the next year.

In line with the observation of this report, some real estate companies are focusing on projects in tier-II and -III cities.

For example, around 68 percent of Sobha Developer's new launches were in tier-II cities like Coimbatore and Thrissur during Apr-Sep 2012.

During the same period, 30 percent of Unitech' s project launches were in non metro cities and 57 percent of DLF's launches were in tier-II cities. Some analysts feel that builders are looking at towns like Jaipur, Chandigarh, Coimbatore to new launches.

However, not everyone is convinced that the trend is here to stay as sales in these cities have not kept pace with the rampant launches.

Its still big cities which are bigger draws, for instance, sales in Chennai, Thrissur, Coimbatore, Mysore and Pune combined. Account for 14 percent of Sobha developers' total sales while sales in Bangalore contributes 63 percent.

Some reports indicate that developers who had acquired land in smaller cities during 2006-07 are now launching these projects in order to monetise and move on. Moreover, they are not buying any more land, which also puts the sustainability of this trend into question.

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