To cash in on growing incomes in small towns and cities, real estate developers are now looking at residential and commercial projects in Chandigarh, Jaipur, Moradabad, Malerkotla, and areas of Western Uttar Pradesh.
Delhi-based groups like Ansal Properties, DLF, and Parsvanath Developers are together looking at setting up nearly 70 residential and commercial projects in towns in northern India.
"People in towns now have higher disposable incomes and are willing to spend more on houses as well as shopping. We have done market studies and are seeing a considerable demand for residential properties, particularly in these towns," said Pradeep Jain, chairman of Parsvnath Developers.
Parsvnath Developers has chalked out a Rs 4,000-crore (Rs 40 billion) expansion plan and a considerable portion of this would be in these towns.
"We would be investing in nearly 40 residential projects and about 10 malls in next 34 years, focusing extensively on places like Moradabad, Sharanpur, Jaipur, Malerkotla, and Ludhiana," Jain said.
Some developers are also in talks with the Uttar Pradesh government on land acquisition, exemption on stamp duty, and single-window clearances for various projects in Aligarh, Bijnor, Mathura, and Jhansi.
"With the UP government showing keen interest in auctioning land and various real estate projects, we see good growth in that region," Jain added.
"The NRI factor is leading the boom in these markets. In cities like Chandigarh and Jalandhar, people have family members abroad. Earlier, people could afford houses only at Rs 7-10 lakh, but now that has gone up to Rs 20 lakh (Rs 2 million) due to remittances and lower interest rates. The developers are looking at houses for Rs 15-20 lakh (Rs 1.5-2 million)," Jain added.
Other groups like Sahara and Ansal say with banks like HDFC, ICICI Bank, ABN Amro and UTI Bank opening branches in these towns, people are taking loans and investing in real estate. Ansal Properties already has residential and commercial projects under way in Jaipur and is looking at increasing its land bank in UP and Punjab.
DLF is looking at setting up malls in cities like Amritsar, Jalandhar, and Chandigarh. This is part of the group's plans to set up 20-odd malls in the north.
"We see a lot of purchasing power and latent demand," a DLF spokesperson said. There is substantial agricultural income in the northern states. But the profile of consumers needs to be studied properly at these centres because even though mall culture may be in fashion, spending power would be slightly below Delhi's.
Meanwhile, an ICICI Bank study stated there were nearly 18.6 crore (Rs 186 million) people in the middle-income segment with higher disposable income.
With the spends of smaller cities nearly 25 per cent of bigger ones, the retailers will have a good opportunity but will have to keep the operating cost low and move fast because the smaller towns have space for just 2-3 players.