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Tier I , Tier II, Tier III cities in India -- important aspects

Surya Srikanth asked clarification and hence this blog:

Metros are basically regarded as Tier I cities, relatively smaller cities are regarded as Tier II cities whereas smaller cities are considered as Tier III ones. Here is the explanation why they are considered so:-

As Indian economy experiences the boom in all sectors triggered by its economic and investment policies, the metros or the Tier I cities are the ones that are inundated with burgeoning investments in the industrial and the services sector. Along with large-scale investments has boomed the realty sector creating congestion, arising out of an increasing demand for residential and commercial properties. This congestion in realty structures has forced the respective governments and many investment companies to seek out for alternative smaller cities leading to a demand for Tier II and III cities.
One of the basic reasons for investments flocking in to the smaller cities is available properties and affordable prices. Moreover, the special initiatives taken by the respective governments in providing the smaller cities with infrastructural facilities and creation of SEZs, has played a vital role in promoting these small towns into cities of the future. Keeping in view all the congenial factors necessary for setting up corporate infrastructure, the investing companies ranging from pharmaceuticals to financial institutions, automobiles to the IT & ITES sectors; to the retail andreal estate sector are opting for the smaller cities transforming them into India's fastest growing cities in a matter of few years.
The large scale investments by the corporate sector in the smaller cities apart from initializing economic prosperity and job opportunities has also created demand for realty spaces. While developers from all the nearby areas flock in to cater to the real estate demands, the property markets in these smaller cities are witnessing along with a changing skyline, an unprecedented hike in real estate prices. While the realty trend in Tier I cities have reached a saturation point, with the yield gap witnessing significant margin of 9.5 to 10 per cent, the Tier II cities record a yield of 10.5 to 11.5 per cent. However, the emerging winners in the present real estate scenario of India are the Tier III cities, which offer greater yields of up to 12 percent. This rising prices and promising future of these cities are driving investors to buy properties predicting long-term gain in years to come.
Recent trend also shows that due to lack of availability of business equipped infrastructure and exorbitant property prices in the existing metros, the IT, ITES and the BPO companies are vying for the smaller cities where they are promised better infrastructure, state-of-the-art office spaces and also skilled manpower. A careful study of these Tier III cities reveals the close proximity of these cities, to the most happening cities of India like Delhi, Mumbai, Bangalore to name a few. Thereby, it will be no mistake if they are called the extension cities of the booming metros. Of late, the tier II cities like Pune, Kolkata and Hyderabad have made business opportunities and infrastructural development like never before. Now it is the turn of the Tier III cities or the smaller cities like Jaipur, Ghaziabad, Kochi, etc. to make it big into the realty business as the government and the corporate sector target them as 'India's Next Destination Cities'.
another point:

Software giant Infosys is looking to expand footprint in India with focus on Tier-II cities, a top company official said today.
"We are looking for land in various parts of the country and looking to expand our capacity with a focus on Tier-II cities," Infosys CEO and co-founderS D Shibulal told reporters here on the sidelines of an award function.
"This year we added nearly 45,000 to 47,000 people. For the next year we have already given campus offers to 23,000 candidates," he said.
"The net additions by us this year are around 25,000," Shibulal said, referring to attrition.
The company recently sealed a deal with Madhya Pradesh government for setting up a development centre in Indore. It is awaiting response from West Bengal government for setting up a centre in Kolkata. The company is present in 10 cities.
"We are awaiting response from the Kolkata (West Bengal) government. We are positive on the offer made to them," an Infosys executive said, replying to a media query.
The company, which has been planning a centre in Gujarat as well, said that at present only the issues related to availability of land at fair price are being considered.
"We are focused on tier-II cities more, since some of the Tier-I cities are facing challenges of infrastructure," he said.
On being asked if he foresees a shift from product-based to service-based operations, Shibulal said, "Infosys has evolved in the last 30 years manifold. If you look at our revenues in 1999, 90 per cent was coming from application development and maintenance, today it is just about 36 per cent.
"We have evolved to next generation consulting and technology organisation. Today we offer a wide range of services, 32 per cent of our revenue comes from consulting and system integration work, 6.5 per cent comes from product and platforms," Shibulal said.
"In percentage terms our aspiration is more to grow in the products and platform space, both organically and inorganically, and maintain balance in all three portfolios."
Commenting on the global scenario vis-a-vis IT sector in India, Shibulal said that globally the environment is pretty uncertain, which reflects in company's guidance. Currently, one needs to be cautious.
Stating his expectations from the coming budget, Shibulal said the need of hour is to grow at 9 per cent, and the expectations from budget are that it will support growth and remove regional imbalances.
"We have to grow at 9 per cent at least, and I think that is the fundamental need for the country. The challenge is how you create nine plus growth."

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