| > | | | | Hyderabad, Chennai and Pune are proving highly |
| India is characterised by major differences in the | | | | attractive business locations, due to their |
| economic, business and socio-cultural | | | | competitive business environments, human |
| environments between its main cities and regions. | | | | resources availability, telecommunications |
| Significant variation in regional economic growth | | | | connectivity, quality of urban infrastructure, |
| rates have emerged, leading to a widening gap | | | | transparency of governance and availability of real |
| between the economies and real estate markets | | | | estate. As well as attracting high value IT, ITES |
| of the more advanced regions, compared with | | | | and biotech activities, these cities are also the |
| the rest of the country | | | | focus of major domestic retail players, attracted |
| The more advanced cities of western and | | | | by the rising aspirations and incomes in Tier II |
| southern India have benefited most from the | | | | cities. |
| opening up of the economy over the past | | | | These trends are being echoed in real estate |
| decade, and they are expected to continue to be | | | | investment; Hyderabad, Chennai and Pune are the |
| the most dynamic of the coming decade. | | | | focus of increasing investor activity, and the yield |
| These states contain India’s | | | | gap between Tier I and II cities has narrowed to |
| wealthgenerating commercial hubs, its best quality | | | | as low as 100 basis points. Some of the largest |
| labour pools and infrastructure, and are the most | | | | and most high profile developments by |
| successful in attracting FDI, due to their more | | | | cross-border developers are in Tier II cities. |
| open business-friendly environments. | | | | Tier III CitiesOffer growing opportunities |
| In contrast, large areas of northern and eastern | | | | During the last two years, more firms have |
| India remain economically backward, including the | | | | begun to evaluate the viability of locating in Tier |
| two highly populous Ganges Basin states of Uttar | | | | III cities, and India is now seeing a gradual |
| Pradesh and Bihar (which alone contain | | | | widening of its real estate base into a larger group |
| one-quarter of India’s population). | | | | of cities. This trend is being led by domestic IT |
| Tier I CitiesThe first choice for new market | | | | and ITES companies such as Wipro, Infosys, and |
| entrants | | | | Satyam, and the more established foreign |
| Mumbai the commercial hubDelhi the political | | | | companies, such as IBM, Microsoft and Dell. |
| capitalBangalore the technology hub | | | | Jones Lang LaSalle has identified 18 Tier III cities |
| Have been the pioneers of Indian real estate | | | | that have the potential to emerge as important |
| growth since the late 1990s. These three cities | | | | real estate markets over the next five years. |
| command by far the highest international profiles | | | | The most successful cities are likely to fall into |
| and have attracted a significant proportion of FDI; | | | | two groups: |
| they provide the largest and most qualified labour | | | | Large cities, such as Kolkata (pop’n 13 |
| pools, the best infrastructure and have developed | | | | million) and Ahmedabad (pop’n 5 million), |
| the most advanced real estate formats. | | | | which have historically lagged Tier I and Tier II |
| Bangalore remains at the forefront of the global | | | | cities, but by virtue of their size, labour market |
| IT outsourcing trends. Delhi and Mumbai, as | | | | quality and economic dynamism, are expected to |
| India’s two largest city economies, have | | | | attract substantial real estate activity. Kolkata |
| developed a diverse range of real estate | | | | (West Bengal) has transformed from an insular |
| activities, and as well as rapidly expanding | | | | communist economy into a business-friendly IT |
| suburban office markets, have led India’s | | | | hub. |
| retail and residential development booms. | | | | Smaller Indian cities (many with populations around |
| Tier I cities are likely to remain the | | | | the one million range), which will compete |
| preferredoption for multi-national companies | | | | successfully for business due to superior education |
| entering India for the first time, and they will still | | | | levels, a higher quality of life and urban |
| be the first port of call for most foreign | | | | infrastructure, good proximity to primary cities |
| real estate investors. | | | | and their cultural and tourist offer. Chandigarh, |
| Tier II CitiesRising rapidly on the radar screen | | | | north of Delhi designed by Le Corbusier and Kochi |
| Hyderabad, Chennai and Pune | | | | on the Kerala coast stand out, but cities such as |
| Tier I are facing strong competition from Tier II | | | | Jaipur, Mangalore, Mysore, Thiruvananthapuram |
| cities. Business costs have increased and labour | | | | and Bhubaneshwar are also attracting increasing |
| pools, the best infrastructure and have developed | | | | corporate interest. |
| the most advanced real estate formats. labour | | | | Domestic funds and developers are active in Tier |
| shortages have emerged in Tier I cities, and as | | | | III cities in order to achieve first mover |
| familiarity with India as a business location have | | | | advantage and benefit from yield compression. |
| grown, more domestic and foreign firms are now | | | | However, many of these Tier III markets will |
| considering Tier II cities for their expansion plans, | | | | continue to lack liquidity over the medium term. |
| or even as their first step into India. | | | | |