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The Rise of Tier-2 and Tier-3 Healthcare Real Estate in India: Bridging the Gap for Millions

With 70% of our small-town population previously seeking healthcare in large cities, what shifts are occurring now? Explore how the rise of tier-2 and tier-3 healthcare real estate is bridging the gap for millions in India. From understanding the need for accessible care to the challenges ahead, discover the promising future and investment opportunities in India's evolving healthcare landscape.
April 16, 2024
2 mins read
Healthcare Real Estate in Tier 2 and Tier 3 cities

A report by Knight Frank and Berkadia highlights a massive gap in healthcare infrastructure. India requires an additional 2 billion sq ft of healthcare space to meet the needs of its population.

For decades, India's healthcare landscape has been a tale of two worlds. Metro cities boasted advanced medical facilities, attracting specialists and offering cutting-edge treatments. However, for millions residing in tier-2 and tier-3 cities, accessing quality healthcare remained a distant dream. This disparity fuelled a need for change, and a solution is emerging – the rise of tier-2 and tier-3 healthcare real estate.

Understanding the Gap: A Need for Accessible Care

Tier-2 and tier-3 cities, categorised by population size, have traditionally lacked robust healthcare infrastructure. Limited hospital beds, a shortage of specialists, and outdated equipment meant residents often faced long travel distances and inadequate treatment options for complex medical conditions. This disparity had a significant impact on public health outcomes, forcing many to forgo crucial medical interventions due to easy access to private healthcare options.

Bridging the Divide: The Rise of Tier-2 and Tier-3 Healthcare Real Estate

Fortunately, a positive shift is underway. Investors and developers are recognising the immense potential of tier-2 and tier-3 healthcare real estate development. This sector focuses on creating modern medical facilities in these developing cities to expand the healthcare industry and provide better medical assistance at lower costs. Here's how it's bridging the gap in the healthcare system:

  • Increased Accessibility: The development of new hospitals, medical office buildings, clinics, and diagnostic centres brings quality healthcare closer to people's homes with effective healthcare related assets. This reduces travel time and associated costs, making essential medical services more accessible. 
  • Improved Infrastructure: Modern healthcare facilities boast advanced equipment, streamlined layouts, and patient-centric amenities. This not only enhances the quality of care but also creates a more comfortable and efficient healthcare experience. 
  • Attracting Specialists: Well-equipped hospitals with growth potential become more attractive to specialists seeking opportunities outside metro cities. This influx of skilled professionals broadens the range of specialties available in tier-2 and tier-3 regions. 
  • Technological Integration: The rise of healthcare real estate is often accompanied by the integration of telemedicine and digital health solutions. This allows for remote consultations, specialist advice, and improved record-keeping, further enhancing the quality of care and patient experience. 

Government and Corporate Initiatives: A Catalyst for Change

The Indian government is actively supporting the growth of tier-2 and tier-3 healthcare real estate through various initiatives. Schemes like the Pradhan Mantri Jan Arogya Yojana (PMJAY) increase healthcare affordability, leading to increased demand for medical services within these regions. Additionally, the government's focus on developing new AIIMS (All India Institutes of Medical Sciences) facilities in tier-2 cities is a significant boost for medical infrastructure. 

Additionally, the Indian government's "Heal in India" initiative aims to increase medical tourism, further necessitating infrastructure growth and giving more opportunities for the healthcare industry to grow.

With that, corporate health insurance helps provide better opportunities to avail quality healthcare. It also facilitates the perspective shift from having access to high-quality healthcare services being a luxury to being a necessity for overall family welfare.

Challenges and the Road Ahead

Despite the promising developments, challenges remain. Attracting and retaining qualified medical professionals, ensuring affordability of treatment for all sections of society, and maintaining high-quality standards across facilities are crucial aspects that need continuous attention.

Fig.1: Challenges

Fig.2: Further Steps To Take

Why Invest in India's Healthcare Real Estate Sector?

CBRE India projects a solid upward trend in rental rates, with an average annual increase of 5-7% across major cities, indicating a promising future for the sector.

Investing in commercial real estate is a great way to diversify your portfolio, and finding the right option can help you boost it. With the healthcare space growing rapidly, investing in healthcare real estate can be an effective profit-making option. Here are 5 reasons why: 

  • Stable Demand:  An ageing population means a consistent demand for medical facilities, leading to steady income for investors.
  • Resilient:  The healthcare sector is less affected by economic downturns as people need healthcare services regardless.
  • Diversification:  Healthcare real estate offers a different asset class to add variety to an investment portfolio.
  • Growing Demand:  Tier-2 and 3 cities are experiencing a surge in healthcare needs as residents return home and disposable incomes rise. This unmet demand creates a prime investment opportunity.
  • Lower Costs:  Land and construction costs are typically lower in these cities compared to metros, offering better returns on investment.

Conclusion: A Brighter Future for Healthcare in India

The rise of tier-2 and tier-3 healthcare real estate holds immense promise for the evolving Indian healthcare ecosystem. By increasing access to quality medical services and healthcare investment options, it has the potential to improve public health outcomes and empower millions to lead healthier lives. With continued government support, private sector investment, and a focus on innovation, this sector can truly bridge the healthcare gap and transform India's healthcare landscape for the better.

If you're looking to diversify your portfolio by finding new investment opportunities in the growing commercial real estate industry, India's healthcare sector is a good option. Get in touch with our team at Strata to get more information on how you can do this!


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