November 17, 2023: In the 22-month period from January 2022 – October 2023, around 3,294 acre of land were acquired by real estate developers in the country, mentioned a JLL report. A substantial proportion (44.4%) of these land deals were transacted in Tier-2 and 3 cities, with a total of 1,461 acre being acquired across 17 separate land deals. The report mentions that this trend has been gaining momentum in northern and western India, in particular. As per the JLL report, Panipat, Ludhiana, Nagpur and Panchkula collectively contributed to around 75% of the total 1,461 acre of acquired land.
Established real estate developers are now targeting new markets, by entering Tier-2 and 3 cities in the country, to launch projects. The JLL data indicates that driven by the increasing demand and buying capacity of the customers, branded developers have successfully closed many land transactions in these cities.
In the north, developers are venturing into cities like Panipat, Sonipat, Kurukshetra, Panchkula, Lucknow, Jaipur, and Ludhiana, and in the west, cities like Nagpur, Khalapur, Surat and Palghar have attracted national level players. In south India, plotted residential projects were launched in cities such as Ambur, Mahabalipuram, Coimbatore, Trichy and Mysuru.
Source: JLL
Sales potential is estimated considering the loading component of the development potential area and the average saleable price in the respective micro markets where the land has been transacted.
It is pertinent to note that 91.6% of the land acquired (1,339 acre) is for proposed residential developments, with a majority being planned as plotted residential developments/units. 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 have been earmarked for plotted developments and valued at over Rs 3,163 crore.
Buyers too are looking to purchase quality homes in Tier-2 and 3 cities. Established real estate players entering these cities have enhanced the home buyer confidence, as these developers have a good track record and strong execution capabilities, along with access to institutional capital.
Encouraged by the unprecedented levels of residential sales in emerging cities, developers are also acquiring land to build relevant supply pipelines for the future. Prominent developers like Godrej Properties, M3M, Eldeco Group and Omaxe Group have entered or expanded in these emerging markets with recent land acquisitions.
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.
Land Transaction Snapshot of Tier 2 and 3 Cities: January 2022-October 2023
| Total number of land deals from January 2022-October 2023 | 17 |
| Value of land transactions from January 2022-October 2023 | Rs 4,918 crore |
| Area of land transacted from January 2022-October 2023 | 1,461 acre |
| Area of land transacted for proposed residential developments (includes plotted developments, group housing, townships) | Approx 1,339 acre |
| Estimated residential development potential | Approx 64 million sqft |
| Estimated Sales Potential of the proposed residential development | Over Rs 21,000 crore |
| Area of land transacted for plotted developments | 1,015 acre |
| Value of land transactions for plotted residential units | Over 3,163 crore |
Samantak Das, chief economist and head of research and REIS, India, JLL, said, “Strategic land acquisitions by real estate developers in Tier-2 and 3 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. In the last 22 months, these land transactions for proposed plotted developments were locked with a value of over Rs 3,163 crore. The launch of new residential projects is expected to strengthen further through new land acquisitions in strategic locations and growth corridors. Therefore, we expect the residential market to remain buoyant and achieve the next wave of growth and expansion with a good response from the buyers.”
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