The demand for rental housing services in Tier-2 cities has significantly increased in recent years. With rising populations and rapid urbanisation, Tier-2 cities are emerging as new hotspots for real estate investment, including the rental housing market.
In contrast to Tier-1 cities, where owning a home is a status symbol, Tier-2 cities are witnessing an increase in demand for rental housing services due to an increasing number of young professionals and students migrating to these cities for education and employment. A recent industry report found that several Tier-2 cities have higher living standards than Tier-1 cities. Indore, for example, has an effective waste management system and has been named the cleanest city five years in a row in Swachh Survekshan, a survey conducted by the housing ministry.
See also: Tier 2 cities in India: Will 2023 be the year of real estate boom in these cities?
One of the primary reasons for the rise of rental housing services in Tier-2 cities is affordability, aided by government initiatives, such as AMRUT and the Smart Cities Mission. Reverse migration has fuelled real estate growth. Land for real estate and infrastructure development is readily available for industrial, commercial and educational facility construction.
The cost of living in Tier-2 cities is significantly lower than Tier-1 cities, making it easier for people to rent rather than buy a home. Furthermore, rental yields are relatively high in these cities, making them an appealing investment opportunity for landlords.
The availability of quality rental properties is driving the growth of rental housing services. As more people move to these cities, developers and real estate firms are investing in purpose-built rental housing complexes that cater to young professionals and students.
Furthermore, the rise of co-living spaces has aided the expansion of the rental housing market. Co-living spaces offer an affordable shared living experience that promotes a sense of community living. This concept is popular among Millennials and Generation Z, looking for cost-effective and social living options. Top medical facilities, such as AIIMS, and MBA institutes, such as the IITs, are located in Tier-2 cities. In addition, the central government regularly announces new and upgraded institutions in their annual budget to boost Tier-2 urbanisation.
To summarise, the rise of rental housing services in Tier-2 cities is a positive trend that has provided a growing number of migrating people with affordable and high-quality living options. Due to the availability of purpose-built rental properties, co-living spaces and online rental platforms, the rental housing market in Tier-2 cities is expected to grow in the coming years.
(The author is co-founder, NestAway.)
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