Role of Tier 2 & 3 Cities steadily shaping India's Real Estate Future

According to a report by Liases Foras, Tier 2 and Tier 3 cities are playing an increasingly important role in determining the future of Indian real estate, accounting for 44% of the 3,294 acres of land developers purchased in 2024. The potential of these cities to propel long-term sectors growth is reflected in this significant shift in investment focus.

In 2024, housing sales in 60 cities totaled 6,81,138 units, representing a remarkable 23% rise from the previous year. Driven by consistent demand across all categories, the primary builder's market saw sales of Rs. 7.5 trillion, representing an astounding 43% YoY rise.

Larger ticket sizes and a balanced supply-demand dynamic in premium markets were the main drivers of luxury and ultra-luxury housing, which accounted for 71% of the total sales value.

With 1,32,532 flats sold, properties priced between Rs. 1 and Rs. 2 crore witnessed a 52% increase in sales, while the ultra-luxury market (Rs 2 crore+) saw an even sharper surge of 73%, demonstrating developers' confidence in serving high-net-worth purchasers. It is clear that Tier 2 and Tier 3 cities are becoming into economic engines, providing both affordability and high-value transactions that reshape India's urban story, given that the real estate sector is currently valued at Rs. 22.5 trillion and contributes 7.2% to the country's GDP.

Although sales of luxury and premium property are still dominated by metro areas, the emergence of Tier 2 and Tier 3 cities has created a more balanced market dynamic in which demand is largely driven by mid-range and cheap residences. The need for housing is being further fueled by the fact that many of these cities are developing into centers of industry, academia, and logistics.

Together with government programs like the Prime Minister's Gati Shakti mission, increased urbanization is improving communication between satellite towns and larger cities, opening up new growth prospects. The consistent price increases in cities like Lucknow, Jaipur, and Bhubaneswar are bolstering their market power.

With the Priority Sector Lending (PSL) category, which covers homes under Rs. 30 lakh, and the Rs. 30–50 lakh segment drawing in both first-time homebuyers and investors, the affordable housing sector continues to be a major driver. The creation of affordable housing is being spearheaded by cities like Ahmedabad, Pune, Indore, and Coimbatore, opening up homeownership to a larger group of people.