What Are Tier II And Tier III Cities?
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What are Tier II and Tier III Cities?

Facility Management Consultant
When it comes to classifying cities in India in term of business, real estate and commercialization, we hear a lot about Tier I, Tier II and Tier III cities? As Tier I cities are highly commercialized metropolises, people still wonder what exactly Tier II and Tier III cities are then. Getting down to the basics, this blog aims to answer those questions.

Tier II Cities

These are the next level down from Tier I, and are basically smaller cities, statistically 1 million in population and are usually regional hubs such as state capitals or industrialized centres. Some examples include Pune, Cochin, Mangalore, and Dehra Dun.

Tier III Cities

This includes minor cities like Nasik, Baroda, Trichy, Madurai, etc. Tier III consist of cities with a population of less than a million. In simpler terms, these comprise cities that are just beginning to wake up and take form.

The issue with a Tier I city  - when it comes to economic boom and investment – is that they are inundated with burgeoning investments in the industrial and service sectors. Along with the boom of large-scale investments, so too has the real estate sector. This creates congestion, which has arisen out of an increasing demand for residential and commercial properties. This is where Tier II and Tier III cities come into play as congestion in realty structures has forced the respective governments and many investment companies to seek out alternative smaller cities.

Tier II and Tier III cities have myriad benefits to them as well.

Availability and Affordability

One of the basic reasons that investments are focusing on smaller cities is available properties and affordable prices. Moreover, special initiatives taken by the respective governments in providing smaller cities with infrastructural facilities, building management and creation of SEZs has played a vital role in promoting these small towns as cities of the future.

Hospitality and Government Initiatives

For facilitating growth of Tier II and Tier III cities, state and local governments provide a lot of infrastructural facilities to attract companies. Considering all congenial factors necessary for setting up corporate infrastructure, investing companies – ranging from pharmaceuticals, financial institutions and automotive companies to the IT & ITES sectors and real estate companies – are opting for smaller cities in hopes of transforming them into business havens and making them India's fastest growing cities in a matter of a few years.

Infrastructure and Manpower

Recent trends also show that due to lack of space management, availability of business equipped infrastructure and exorbitant property prices in the existing metropolitan areas, IT, ITES and the BPO companies are vying for smaller cities where they are promised better infrastructure, state-of-the-art office spaces and also skilled manpower.

India has many Tier II and Tier III cities, which is a very good sign as it gives a lot of space for economic boom and investment. As more and more companies are investing into these cities, the per capita income, lifestyle and infrastructure are developing towards a positive and welcoming change. In just the past 5 years, real estate has seen more than a 100% increase in these cities. There has also been a surge of employment as multiple multinational corporations and various national companies are expanding their business operations in such cities after getting wooed by the possibilities of superior building management, infrastructure and skilled and cheap manpower. So while Tier II and Tier III cities aren’t the sole reason India is becoming a global superpower, they are definitely one of the causes of its internal expansion and why many multinational corporations are investing and setting up shop in the country.