Southern states seem to have caught on the importance of Tier II cities. To the recent list of 36 future cities, culled out by Girem, an urban planning body, south contributes 13
Recently, Girem, an independent body with focus on urban planning and real estate, unveiled a list of 36 future cities across states at its 4th Girem Leadership Summit. These future cities were culled out from a large pool of short listed cities by a panel of experts who have selected these cities based on various parameters such as population size and the strength of the education and culture.
Interestingly, out of the 36 future cities, the top three — Thiruvananthapuram, Kochi and Kozhikode – are from Kerala. Of the top 10 cities, four – Coimbatore, Tiruchi, Madurai and Salem – are from Tamil Nadu and five more cities – Mangalore, Belgaum and Mysore in Karnataka. Along with Vishakapatnam and Vijayawada in Andhra Pradesh and Puduchery south India takes its contribution to 13 out of the 36 future potential cities.
So what makes – South India so special, when it comes to development in future?
“Culture, cosmopolitan outlook, quality of human resources and strong educational system are the key factors that make south India a strong investment destination,” said Shyam Sundar S Pani, president of Girem.
According to him, in spite of technological advancements, business is human driven and these cities were selected based on the above-mentioned parameters along with educational institutions existing in those cities as well as the population. “We will connect with the city authorities and explain to them the required framework to make these cities more proactive to attract investors, by improving standards of living and public services,” Pani added.
K Purushothaman, regional director of Nasscom (Tamil Nadu and Kerala) elaborates the strengths of southern cities. “Kerala is the only state to have three international airports in Thiruvananthapuram, Kochi and Kozhikode, and hence connectivity is its biggest strength. The state is also known for education and high literacy rate. It is already on the world tourism map and Brand Kerala is well established in the minds of foreign investors,” he says.
Chennai-based property developer, Akshaya Homes — which recently took a new name for itself, Akshaya Uncom promise — has ambitious pan-south Indian plans that involve tapping the emerging potential and also enter into new areas such as creating infrastructure for healthcare and education. “We are very confident about the growth potential available in south India, especially in smaller cities. Besides Chennai, we are already present in Coimbatore and by the end of this year we would have covered Tiruchi, followed by Madurai. Within next three years, we would have made our presence felt across south India and focus will be to develop mini-townships. We will simultaneously create infrastructure facilities for healthcare and education, keeping in tune with the economic developments that some of these southern cities are likely to achieve,” says T Chitty Babu, managing director of Akshaya.
Referring to prospective cities in Tamil Nadu that have immense scope of becoming future growth hubs, if given the right push, Purushothaman says, “A city like Coimbatore is already well established and has attracted a lot of big brands. Nearly 40 per cent of recruitment for the IT industry already takes place from in and around the city. For leading IT player, Cognizant, Coimbatore is already a big destination employing around 5,000 people. The company has its second largest hub in the country in the city. In addition, MNCs like Ford Business and Robert Bosch are looking to expand their existing operations in the city.” Coimbatore has an international airport and employee cost is much less, when compared to other established cities and established infrastructure also favours the city to attract new investment.
On the other hand, Tiruchi is a well-established educational hub, thanks to the presence of NIT and IIM among other institutes. “However, Madurai, where the employee cost is very low and has very good institutions in and around, is yet to grow. Thanks to the support from the new government in the state, it is sure to grow soon,” he says. In the case of Salem, the proximity to Bangalore and availability of good manpower are attracting companies. First America and CapGemini are two international companies that already have a base there, as is the case with Honeywell in Madurai, Purushothaman added.
Not only industries and property developers, the city has lot of opportunities for banking and financial sector players as well. Tier II and III centres are important markets for home loans business. There are a lot of jobs being created in the markets and migration from villages to the towns as a result of these jobs, make a case for increased housing finance requirement.
“In tier II and III markets, the supply is limited and the demand is huge. There is a lot of economic growth in the smaller markets and so the urge to purchase their first house is also widespread,” says VK Sharma, CEO, LIC Housing Finance.
Whether it is Trichy, Salem, Madurai, Tirunelveli or Erode in Tamil Nadu or Palakkad, Kottayam or Thrissur in Kerala or Vizag, Vijayawada or Guntur in Andhra Pradesh, there is a lot of economic activity and real estate development.
“In fact Coimbatore is one of the hottest investment destinations in the south because of factors like industrial growth, proximity to other important cities, pleasant weather and so on. It is a market with a capacity to absorb Rs 80 crore home loan disbursals per month. We see a lot of investor interest in the market,” says Srinivas Acharya, managing director, Sundaram BNP Paribas Home Finance.
“Coimbatore is a tier II city with tier I capabilities,” agrees Anand Purusothaman, CEO of IT solutions company Payoda. The company was the first to occupy the TIDEL Park IT complex in the city. It did look at other options but settled for Coimbatore because of the several advantages it offers. The decision started to pay off in the initial months itself, he adds. Work culture is the biggest advantage. Employees in tier II cities are more loyal compared with their counterparts in metro cities. Attrition is much lower, as the workforce largely prefers to stay in their native locations.
“Initially, we took up 17,000 sq ft in the park. Encouraged by the positive experience, we intend to further expand within the complex,” he says.
Bhamathi Prakash, managing director of Merrill Technology Services India, says Coimbatore is an ideal destination for not only for IT companies but also for others in several ways including the salubrious weather conditions and rich talent pool. The city has over 25 engineering colleges, 18 polytechnic institutions, 72 colleges teaching humanities, two medical colleges and one law school.
It is not only manufacturing, IT and property development, even retailers, especially those dealing with gold jewellery, see major growth opportunity in south India, more specifically in the emerging cities in the region.
South India accounts for 40 per cent of the total gold consumption of the country, with Tamil Nadu being the biggest consumer followed by Kerala. No wonder why most of the large organised players have been spreading across the key cities in the region.
Some of the organised gold jewellers started off their expansion in metros, but for their next level of growth, they are focusing on tier II and III cities. The growing purchasing power and the aspiration for branded jewellery have been beckoning the big brands to these cities.
As per the rating agency Crisil, tier-II and III towns will drive growth for the branded gold jewellery retailers over the medium-term as around two-thirds of their new outlets will be in such towns. Crisil had rated 63 gold jewellery retailers, which collectively account for 20 per cent by revenue of the gold jewellery retailed in India in 2010-11.
According MP Ahmed, chairman of Malabar Gold, the company is planning to open 40 stores in Tamil Nadu in five years and most of them will come up in tier II cities like Coimbatore, Salem and Trichy.
Of the 29 stores of Gold Plus, the mass-market brand of Titan, 17 are in Tamil Nadu. Gold Plus is a brand specifically meant for the tier II and tier III cities.
“Of the 14 stores to be opened by Joyalukkas in two years, 13 will be coming up in tier II and III cities. These cities contribute 55 per cent of the revenue and this could go up to 65 per cent in two years,” said Nandakumar T, CFO of Joyalukkas. Joyalukkas is in the process of opening stores in Trichy, Kozhikode, Thiruvantanpuram and at the Lullu Hyper mall in Kochi.
