The Indian real estate market is witnessing a significant shift, with tier 2 and 3 cities emerging as key players. Fueled by comprehensive infrastructure development, improved connectivity, and an expanding urban ecosystem, these cities are no longer mere alternatives to metros but strong contenders in their own right. Developers and investors who once focused on metro cities like Delhi, Mumbai, and Bengaluru are now diversifying into Lucknow, Indore, Jaipur, and Dehradun among others. These cities offer superior quality of life, lower cost of living, and expanding commercial prospects, making them ideal for both end-users and investors.
A report released by CREDAI-Liases Forum stated that 44% of the 3,294 acres of land acquired by real estate developers in 2024 were concentrated in the emerging hubs of India’s Tier-2 and Tier-3 cities. The housing sales in 2024, reached 681,138 units across 60 cities, recording a 23% year-on-year (Y-o-Y) increase.
Besides, one of the key advantages of investing in Tier 2 and 3 cities is affordability coupled with high ROI potential. Compared to metro cities, these regions offer significantly lower land acquisition and construction costs, making real estate investments more accessible. Additionally, as urbanization accelerates and infrastructure improves, property appreciation rates in these emerging cities are witnessing a steady rise. The growing demand for residential and commercial spaces, driven by expanding businesses and a rising workforce, is also leading to higher rental yields, making these cities lucrative for investors seeking long-term gains.
Manit Sethi, Director, Excentia Infra, says, “Tier 2 & 3 cities are witnessing a transformation with improved infrastructure, better connectivity, and rising disposable incomes. Cities like Dehradun are emerging as prime real estate destinations, as they evolve into a thriving economic hub with premium residential and commercial opportunities. With affordability, strong rental demand, and government-backed initiatives like smart city projects, the city presents an unparalleled investment opportunity. As urbanization accelerates, we believe its real estate market is set for sustained growth, making it an ideal choice for investors.”
The report further highlights that luxury and ultra-luxury housing emerged as key drivers of demand across 60 cities, contributing 71% of the total sales value, driven by larger ticket sizes and a balanced supply-demand dynamic in premium markets. While metro cities continue to dominate luxury and premium housing sales, the rise of Tier 2 and 3 cities has introduced a more balanced market dynamic, where mid-range and affordable properties play a crucial role in driving demand.
Piyush Kansal, Executive Director, Royale Estate, says, “The demand for luxury housing is no longer confined to metro cities. Tier 2 & 3 cities are experiencing a surge in high-end residential developments due to rising incomes and an expanding base of affluent buyers. Besides, investors are recognizing the long-term growth potential, making it a strategic move to invest in these cities now. Amidst this surge, we look forward to capitalizing on this trend by introducing projects that offer world-class amenities, sustainability, and superior design. The charm of spacious homes at competitive prices, combined with improving social infrastructure, is making these regions the next big destination for luxury living.”
Moreover, tier 2 and 3 cities are witnessing a surge in luxury and branded real estate developments, driven by increasing demand for premium housing and mixed-use projects. Developers are capitalizing on this trend by launching gated communities, high-rise apartments, and integrated commercial hubs that cater to the aspirations of a growing affluent class. The hospitality and retail sectors are also expanding rapidly, with premium malls and lifestyle-centric developments reshaping urban landscapes. This shift not only enhances the overall real estate ecosystem but also makes these cities attractive for both homebuyers and investors seeking high-end properties.
Yash Miglani, Managing Director, Migsun Group, says, “India’s real estate boom is expanding beyond metro cities, with Tier 2 markets emerging as key hubs for luxury housing. Increasing disposable incomes, large-scale infrastructure projects and a new wave of aspirational buyers are driving demand for high-end residences. Hence, we see immense potential in these cities and plan to strategically introduce premium developments featuring world-class amenities, smart homes, and a vibrant community lifestyle.”
Tejpreet Singh, Managing Director, Gillco Group, says, “Tier-2 and 3 cities are redefining luxury by offering the perfect balance between affordability and exclusivity. Unlike metros, where space is a constraint, these cities provide the opportunity to develop expansive projects featuring larger residences, world-class amenities, and lush green landscapes. This allows developers to create premium spaces that offer privacy, grandeur, and a superior lifestyle at a more accessible price point. Thus, the growing demand for high-end living in these cities makes them a lucrative market for luxury real estate.”
Therefore, with infrastructure upgrades, business expansions, and a rising affluent class, Tier 2 and 3 cities are set to become India’s next real estate goldmine. Investors looking for long-term capital appreciation and stable rental income should recognize the massive opportunity these cities present. As metros become saturated and expensive, smart investments in emerging tier 2 and 3 cities could yield unmatched returns in the coming years.