Housing sales in the top 30 tier 2 cities fell sharply by 13% in the July-September quarter of 2024 (Q3 CY2024) while new launches plummeted by 34%, according to a report by NSE-listed real estate data analytics firm PropEquity.
Sales declined to 41,871 units in Q3 CY2024 against 47,985 units in the same period last year while launches came down to 28,980 units in the recently concluded quarter from 43,748 units in the same period last year.
Samir Jasuja, CEO & Founder, PropEquity, said that the decline in sales and launches is on account of the higher base effect of last year, which had recorded historic highs.
“The low cost of living, availability of skilled workforce and advantageous operational cost for companies besides good connectivity and infrastructure in state capitals have been driving demand for homes. However, as seen from an all-India context, the top 30 tier 2 cities have been underperforming as sales and launches with respect to top ten cities are only 1/3,” he said.
Certified Financial Planner, Lt. Col. Rochak Bakshi (Retd.), Founder and CEO of True North Financial Services, said that real estate investment has historically not been very lucrative in tier 2 cities and despite the growth in connectivity and infrastructure, these cities have failed to generate the kind of return that would attract investors.
“The cost of managing a property combined with poor rental yields, not-so-great appreciation in capital value and highly illiquid nature make investment in these cities highly risky. Unless required for end-use, investors must opt out of tier 2 cities and instead invest in more liquid and return-generating instruments like mutual funds, PMS etc,” added Bakshi.
The West Zone comprising Ahmedabad, Vadodara, Gandhinagar, Surat, Goa, Nashik and Nagpur contributed 72% to the total sales, as per the report.
The top three cities that witnessed the maximum drop in launches were Sonepat, Panipat and Agra. Only eight cities saw growth in new launches with the top three being Bhopal (268%), Dehradun (100%) and Coimbatore (77%). West Zone contributed 71% to the total launches.
Among state capitals, Bhopal witnessed the maximum rise in new launches at 268% while Trivandrum saw a maximum decline in new launches at 87%. Similarly, Dehradun saw a maximum rise in sales at 47% while Bhubaneshwar and Chandigarh saw a maximum decline in sales at 18% each.
