Tier-2 cities in India have become the hotbed for the future growth of the ever-evolving real estate market, offering humongous opportunities for investors and residents alike. The evolution of Tier 2 cities as a cynosure of real estate business is shaped by a slew of macroeconomic factors, such as improved infrastructure, rapid urbanization, advanced technology, evolving work culture, and keenness for high-end sustainable living environment. The burgeoning business dynamics of Tier-2 cities have caught the attention of domestic developers and global investors that could potentially create optics for economic expansion and overall development of the areas.
Based on economic activities, infrastructural orientation and demography, cities across India are classified into Tier 1, Tier 2, Tier 3 and Tier 4. Cities like Meerut, Karnal, Fatehabad, and Amritsar, among others, are the fast-growing urban broughs, though they are area-wise smaller vis-a-vis major metropolitan cities, such as Delhi, Gurugram, Mumbai, and Bengaluru. The landscape of real estate is shifting from Tier-1 to Tier-2 cities as people prefer to move away from the stressful, bustling metro life in search of peace and mental composure. Growing rental markets and high demand for luxury and spacious apartments underscore the market capabilities of real estate in these cities.
Lower land values, affordability, improving infrastructure with better transportation networks and public amenities, job opportunities, and quality life with less congestion and pollution-free atmosphere in these cities are attracting developers as well as property buyers, leading to substantial growth in the real estate sector. Also, these areas have become magnets for start-ups, talented people and skilled workforces that hold promising futures for the realty market. According to the Consumer Sentiment Survey conducted by Anarock, 26 per cent of homebuyers prefer investing in Tier-2 and Tier-3 cities. A report by Housing.com also highlights the significant trend of Tier-2 cities emerging as real estate hotspots.
Government initiatives and supporting policies have also played a key role in boosting the real estate footprints across Tier-2 cities. The flagship schemes, such as the Pradhan Mantri Awas Yojana (PMAY), Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Smart Cities Mission, and Real Estate (Regulation and Development Act), 2016 (RERA) have made a strong ecosystem for sustainable urbanization. Rail networks, expansion of metro facilities, expressways, and regional air connectivity under Ude Desh ka Aam Nagrik (UDAN) scheme have enhanced accessibility to Tier-2 areas, making them more attractive for businesses, commercial activities and residential destinations. In the financial year 2023-24, housing sales surged 11 per cent to around 2,08 lakh units in top 30 Tier-2 cities across India, according to a report of PropEquity.
In a nutshell, the prospects of real estate in Tier-2 cities look sanguine with huge opportunities for development and growth. As India is on the verge of becoming a USD 5 trillion economy by FY 2026-27, the booming market potential of Tier-2 areas will play a crucial role in achieving this ambitious goal. Sustainable practices, technological advancements, a local pool of talent, and supportive government measures have made these cities the new growth engines of India’s real estate. Homebuyers, investors, and developers are all set to reap the benefits of this burgeoning segment as they recognize the dynamics and emerging trends of the real estate market. Collaboration between investors, developers, and government agencies will accelerate the growth of Tier-2 cities in a holistic and sustainable way.
