Are Tier-II Cities the Next Real Estate Hotspots? Data Shows Promising Growth

As top-tier cities grapple with the dual challenges of overburdened amenities, rising pollution, and relentless congestion that turns every breath into a struggle, many residents find themselves longing for the simplicity and charm of their hometowns and villages. Increasingly, those living in Tier-I cities are seeking refuge from the chaos, either by retreating to the hills or returning to Tier-II cities for a better quality of life.

This shift is reflected in a recent report by PropEquity, a leading real estate data analytics firm. The report highlights that weighted average housing prices in 23 Tier-II cities surged by up to 65% from January to September this year, with price declines observed in only five cities.

Notably, Jaipur experienced the highest price growth, with the weighted average prices for newly launched housing projects rising 65% to Rs 6,979 per square foot during this period. In contrast, the average rate in Jaipur last year was Rs 4,240 per square foot, underscoring the growing demand for real estate in Tier-II cities as people seek alternatives to urban congestion.

Samir Jasuja, Founder & CEO of PropEquity said, "Tier II cities have seen renewed interest from developers, corporates, financial institutions and investor community. The cheap availability of land in these cities followed by the massive development of connectivity infrastructure and strong demand has led to an increased supply of premium and luxury housing."

As per the data of north India, Agra saw an increase of 59 per cent in prices, followed by Chandigarh 34 per cent, Bhiwadi 25 per cent, Indore 20 per cent, Dehradun 14 per cent, Ludhiana 11 per cent and Lucknow 1 per cent. However, Bhopal saw a decline of 5 per cent while Mohali and Sonepat witnessed a fall of 8 per cent and 26 per cent, respectively.

Yashank Wason, Managing Director, Royal Green Realty hailed the growth saying that the remarkable 65% rise in housing prices in top tier II cities, underscores the growing demand for quality living spaces in these emerging markets. "In Delhi's neighbourhood, Bahadurgarh is gaining prominence. It benefits from infrastructure upgrades, including improved road networks, and metro connectivity. Indore has also turned out to be a prominent tier 2 city real estate hub since it features a booming IT and educational sector, infrastructure, and diverse options." 

In South India, Guntur led the way with a 51% increase in housing prices, followed by Mangalore at 41%, Visakhapatnam at 29%, Vijayawada at 21%, Coimbatore at 11%, Goa at 6%, and Kochi at 2%. On the other hand, Trivandrum experienced a 4% decline, while Mysore saw a sharper fall of 14%.

In West India, Gandhi Nagar recorded a 19% rise in housing prices, followed by Surat at 14%, Nagpur at 12%, Vadodara at 10%, and both Nashik and Ahmedabad at 4%. In East India, housing prices rose by 15% in Bhubaneswar and 14% in Raipur, reflecting steady growth in these cities.

Commenting on the report, Madhur Gupta, CEO Hero Realty, said that the influx of employment opportunities, lower cost of living, and affordable housing are key factors driving real estate demand and supply in Tier 2 cities, driven by strong buyer sentiment. "The media is influencing this trend by promoting elevated lifestyles and gated amenities, creating new aspirations in Tier 2 and Tier 3 cities, and driving demand growth. Developers are introducing high-priced inventory in response to this aspired lifestyle and increased affordability, fuelled by the expansion of industries such as IT/ITES and smart city initiatives. Chandigarh has emerged as a frontrunner, leading market size expansion among top Tier 2 cities," he said.

The experts added that this surge highlights buyers’ trust in tier II cities, meant for investment and premium living. With hyper-congestion and dwindling quality housing supply in Tier-1 cities, the next generation of homebuyers is focusing on Tier-2 cities for a modern urban lifestyle, they said.