Top 7 Tier-2 Cities Attracting HNIs and NRIs for Real Estate AIF Investments
India’s Tier-2 cities are rapidly gaining traction as prime destinations for real estate investments, particularly among High Net Worth Individuals (HNIs) and Non-Resident Indians (NRIs). These cities offer a unique blend of affordability, economic potential, and robust infrastructure, making them attractive for Alternate Investment Funds (AIFs). In just nine months, investments in real estate AIFs surged by 8%, rising from ₹68,540 crore in March 2024 to ₹73,903 crore by December 2024.
Tier-2 cities, such as Coimbatore, Indore, Lucknow, Jaipur, Nagpur, Ahmedabad, and Kochi, are becoming famous AIF destinations due to several key factors. These cities often have lower upfront and land costs compared to metros, yet they offer potentially higher rental yields and returns on investment (ROI). Rapid urbanization, driven by affordable land banks, creates opportunities for large-scale development. Economic drivers, including the proliferation of IT parks, global supply chain growth, logistics hubs, and industrial corridors, further enhance their appeal.
Key Elements Attracting AIF Investment
Infrastructure Upgrades - The development of new airports, metro line expansions, and ring roads is improving connectivity. - Enhanced connections to industrial corridors support logistics and manufacturing. - The creation of expressways and multimodal logistics hubs facilitates efficient goods movement.
Economic Drivers - The expansion of IT parks and technology hubs is linked to the growth of skilled employment opportunities. - The proliferation of industrial clusters, such as Electric Vehicle (EV) manufacturing, is fostering new job opportunities. - Emerging Global Communications Companies (GCCs) are contributing to the development of strong start-up ecosystems, supporting the demand for skilled workers.
Real Estate Performance - Tier-2 cities typically offer rental yields between 3.5% to 6%, which are generally higher than those in metropolitans. - There is increasing demand across mid-income and premium sectors. - The entry of branded developers is enhancing market credibility and investor confidence.
Demographic Strength - The availability of jobs is creating an expanding young workforce looking for opportunities and skill development. - The trend of reverse migration is increasing the demand for affordable housing and lifestyle improvements in Tier-2 hubs.
Top Tier-2 Cities for Real Estate AIF Investments
1. Coimbatore, Tamil Nadu - Economic Strength : Textile, manufacturing, IT, and education institutions. - Real Estate Trends : Year-over-year 10%+ price growth, with micro-markets like RS Puram and Saravanampatti gaining popularity. - AIF Interest : Increasing investments from funds such as Piramal, with projects backed by 99acres. - Developer Activity : National developers are entering the market with mid-income and luxury apartment launches. - Future Outlook : New airport, metro, and industrial corridor developments will drive growth.
2. Indore, Madhya Pradesh - Economic Strength : Commercial, industrial, and educational hub of Madhya Pradesh, known for its clean city reputation. - Real Estate Trends : Rapid growth in prices, averaging 12% YoY in various residential clusters, with Vijay Nagar being a key area. - AIF Interest : Growing interest in logistics warehouses, with increasing demand for grade-A office and premium residential spaces. - Developer Activity : New township and retail developments by national brands. - Future Outlook : Infrastructure projects and business growth will continue to boost appreciation.
3. Lucknow, Uttar Pradesh - Economic Strength : Government, educational institutions, IT services, and manufacturing base. - Real Estate Trends : 8% to 10% year-over-year growth, with emerging sectors like Gomti Nagar and Aliganj. - AIF Interest : Growing interest in affordable housing and commercial real estate. - Developer Activity : Multiple affordable housing project launches by successful developers. - Future Prospect : Airport and metro connections will sustain the positive trend.
4. Jaipur, Rajasthan - Economic Strength : Tourism, manufacturing, education, and information technology. - Real Estate Trends : Prices increasing by approximately 7% to 9% annually, with C-scheme and Vaishali Nagar being strong markets. - AIF Characteristics : Buyers are investing in logistics and warehousing hubs, particularly due to the Delhi–Mumbai Industrial Corridor (DMIC). - Developer Activity : National developers are launching affordable housing and luxury developments. - Future Prospect : Continued investment in infrastructure and industrial parks will maintain the positive trend.
5. Nagpur, Maharashtra - Economic Strength : Thermal power generation, steel manufacturing, and emerging IT hubs. - Real Estate Trends : Residential and commercial area prices have increased by approximately 6% to 8% annually. - AIF Characteristics : Interest in industrial real estate and warehousing. - Developer Activity : New technology parks and mixed-use developments through MIDC-sponsored initiatives. - Future Prospect : Additional metro developments and new road connections will further boost real estate growth.
6. Ahmedabad, Gujarat - Economic Strength : GIFT City, GCC, finance, and IT. - Real Estate Trends : Real estate prices increasing by over 7.9% YoY. - AIF Characteristics : High interest in office parks, co-working hubs, and residential projects. - Developer Activity : Large-scale affordable housing developments and gated communities. - Future Prospect : Upgraded infrastructure will enhance opportunities for faster growth and increased demand.
7. Kochi, Kerala - Economic Strength : Shipping, IT, tourism, and medical sectors. - Real Estate Trends : Moderate and steady price growth of 7% to 9%, with demand for luxury and serviced apartments. - AIF Characteristics : Rising number of Gulf return NRIs investing in residential developments and hotels. - Developer Activity : Development of IT parks and upscale residential projects. - Future Outlook : Market expansion supported by ferry connectivity and airport growth.
Conclusion The rise of Tier-2 cities represents a new frontier in India’s real estate development, offering a range of compelling investment opportunities. Backed by affordable growth and institutional interest, these cities are poised to attract more investors and homebuyers. Keeping a close eye on these emerging centers is essential for anyone looking to capitalize on the real estate market's potential.
