Non-metros lead in retail growth with brands expanding presence

India is seeing doubling of retail space. Tier II, III cities like Baroda, Indore, Nagpur, and Udaipur are going to see new malls with an area of approximately 2.50 million sq. ft. added to their current portfolio. FMCG market in Tier II and III cities are expected to grow at a CAGR of 14.6 per cent between 2016 and 2025.

The Indian economy sustained itself throughout the pandemic and the recent financial upheavals plaguing most of the world thanks to the aftermath of Covid 19 and conflict in Ukraine. India remained stable only because its domestic market provided the much-needed resilience. Not a surprise, as indicators point out that much of the domestic market resilience was contributed by the country’s Tier II and II cities which promise the potential of enormous socioeconomic growth. Mindsets are changing as these cities become attractive alternatives to work and live in when compared to metros heaving with population, congestion, high levels of pollution and expensive living. The country has an impressive lineup of these cities where residential and commercial real estate are experiencing a phenomenal boom as is retail and lifestyle products – Ahmadabad, Lucknow, Chandigarh, Ludhiana, Bhopal, Indore, Kochi, Amritsar, Goa, Guwahati, Jaipur, Agra, Coimbatore among others.

Reputable and premium development boosts growth

Well-known Indian developers have realized the potential as Covid-19 introduced the hybrid and work from home models that made relocating to Tier II, III cities with their affordable cost of living attractive. Migration from metros has not only begun, trends indicate that this is going to continue. State governments have focused on developing infrastructure not only comparable to metros but in some cases, even better. Developers are providing metro quality facilities in their commercial and residential projects that make life easier for the metro migrants.

In the last few years, Lucknow is the epitome of the arrival of non-metros as key hubs of India. Having expanded its periphery, it has become a very attractive investment hub that has acquired millions from new businesses and established corporations that realize its potential.

Now, UP’s capital is a connecting link between the other cities and towns of the state and the National Capital Region. Kochi and Amritsar are already well established international tourist destinations with modern international airports, like Lucknow. Indore and Ludhiana have become an integral part of India’s multi-modal logistics network, contributing to the domestic supply chain.

Entry of malls and brands

A report by Anarock Property Consultants had predicted India would see doubling of retail space this year and this is coming true. Tier II, III cities like Baroda, Indore, Nagpur, and Udaipur are going to see new malls with an area of approximately 2.50 million sq. ft. added to their current portfolio. Lulu has already charted out its success story in Lucknow , Kochi and plans for Ahmadabad. Other mega names such as Raheja Corp, Phoenix and Nexus have new large-scale expansion in Tier II and III cities. Reputation Today released a report in the first quarter of 2022 stating that the FMCG market in Tier II and III cities are expected to grow at a CAGR of 14.6 per cent between 2016 and 2025.

During the pandemic, e-commerce changed the rules of the game as smaller cities experienced easy access to national and international brands hitherto only available in metros. Japanese clothing brand Uniqlo are perfect examples of international brands seizing the goldmine that is Tier II, III India. Both brands have preferred to expand in these cities rather than jostle it out in overcrowded metros with a multitude of well established brands. 