The action in real estate seems to have shifted to tier II cities as people searching for property deals surged 173% in the first three months of calendar year 2018 in 25 tier II cities. These include Ahmedabad, Lucknow, Indore, Patna, Jaipur, Bhubaneswar and Surat, among others.
“Home search trends in 25 cities indicate 173% growth in traffic from tier II cities during the first quarter of 2018 compared to the first quarter of 2017," according to a report by Makaan.com, an online real estate portal owned by Singapore-based Elara Technologies Pte. Ltd, which also owns Housing.com and PropTiger.com.
Visakhapatnam (Andhra Pradesh) registered the highest growth in terms of searches at 489% year-on-year (y-o-y), followed by Patna (Bihar) which saw search growth by 400% y-o-y.
Increase in property searches has also resulted in higher lead (enquiry) generation. Lead generation refers to people who actually show interest in a property they have searched for on a portal by following up on the type of property or location.
According to the report, lead generation from tier II cities accounted for 23% of total lead generation. In fact, lead generation itself grew by a huge 242% across the two time periods. While 60% of this growth in tier II cities were related to property buying, the remaining 40% was in the rental market.
Besides search and leads, overall listing of properties has grown by 22% on the portal over the period, with 88% buy listings, and the rest being rent listings.
Ravi Bhushan, group chief product and technology officer of Housing.com, PropTiger.com and Makaan.com said, “There is a clear trend that comes to the fore with respect to the demand and supply equation in tier II cities. These cities are doubling up as major centres of economics and that is evident in the way that the housing market is shaping up. This pick-up in listings, searches and the intent of people to inquire about a purchase is encouraging for India’s real estate market."
Other experts are also expecting a pick-up in the real estate market, especially in tier II cities, but not so soon. “We were expecting a revival in real estate sector in tier II cities, given the government’s Make-in-India policy and infrastructure development like industrial corridors passing through different tier II cities and creation of special economic zones. But such significant jump so early is surprising," said Samantak Das, chief economist and national director (research), Knight Frank India, a real estate consultancy firm.
A word of caution before we celebrate the real estate revival: comparing January-March 2017 with the same period in 2018 for property searches may not be the best metric since property search and transactions were at an all- time low during that quarter, because of the after-effects of demonetisation in the previous calendar quarter (October-December 2016), explained Das.
This could just be low base effect. Therefore, despite the surge in property searches, most experts don’t expect any significant jump in prices. The case for an investment in tier II cities or metros is still not that clear.