Attributed to Mrinaal Mittal, Director, Unity Group
India’s real estate sector has long been dominated by the bustling metros—Mumbai, Delhi, Bengaluru, Chennai, and others. These cities were once the focal points of residential and commercial development, driven by urban migration, IT boom, and global investments. But the tide is turning. Today, Tier 2 and Tier 3 cities are emerging as the real torchbearers of India’s real estate growth story, offering a fresh canvas for development, investment, and innovation.
The Rise of the New Urban Frontier
With rising costs, congestion, and limited land availability in metros, real estate developers and homebuyers alike are looking beyond traditional cityscapes. Cities like Indore, Lucknow, Coimbatore, Jaipur, Bhubaneswar, Surat, and Chandigarh are witnessing a real estate renaissance—fueled by government incentives, infrastructure push, digital adoption, and aspirational middle-class populations.
One of the key catalysts behind this shift is the government’s Smart Cities Mission and AMRUT (Atal Mission for Rejuvenation and Urban Transformation), which have improved civic infrastructure and made these cities more livable. The expansion of highways, airports, metro rail, and digital infrastructure has made smaller cities more accessible and investment-friendly.
A Magnet for Developers and Investors
Developers who previously focused exclusively on metros are now actively acquiring land and launching projects in Tier 2 and Tier 3 locations. The cost of land acquisition is significantly lower, regulatory frameworks are becoming more transparent, and the local demand for quality housing and commercial spaces is steadily rising.
Real estate investment trusts (REITs) and private equity firms are also exploring new opportunities in these cities. Warehousing and logistics parks, driven by the e-commerce boom, are finding a natural home in peripheries of Tier 2 towns. Meanwhile, retail chains and co-working spaces are tapping into the rising consumerism and entrepreneurship in smaller cities.
Affordable Housing and Growing Demand
One of the biggest growth drivers in these markets is affordable and mid-income housing. Government schemes like PMAY (Pradhan Mantri Awas Yojana) have empowered low and middle-income families to become homeowners. The relatively lower cost of living and favorable loan structures have further boosted demand.
The pandemic has also played a pivotal role. With remote work becoming mainstream, many professionals have returned to their hometowns and are investing in real estate there. This reverse migration has changed the landscape of housing demand—triggering a rise in plotted developments, gated communities, and smart housing in non-metro locations.
Commercial and Retail Real Estate Gaining Ground
It’s not just residential real estate that is thriving. Tier 2 and Tier 3 cities are witnessing a surge in demand for commercial office spaces, particularly from startups, IT/ITES companies, and educational institutions. Hybrid and co-working spaces are expanding their footprint, catering to freelancers, entrepreneurs, and regional businesses.
Retail brands, from fashion to electronics to food & beverage, are entering smaller markets to tap into the growing disposable incomes. Malls, shopping plazas, and multiplexes are becoming common sights in cities that, until a decade ago, had limited organized retail.
Challenges and the Road Ahead
Despite the promise, the journey is not without challenges. Inconsistent urban planning, bureaucratic delays, and the need for better governance still exist in many smaller towns. Moreover, developers must ensure that their projects are aligned with the unique socio-cultural fabric of these cities rather than replicating metro-centric designs.
Nevertheless, the trajectory is promising. With sustained policy support, digital empowerment, and a focus on holistic urbanization, Tier 2 and Tier 3 cities are set to play a defining role in India’s real estate narrative.
Conclusion
The real estate boom is no longer confined to the skyline of metros. India’s growth is becoming more inclusive, balanced, and dynamic—spanning the vast breadth of its smaller cities. As the aspiration of ‘New India’ takes shape, Tier 2 and Tier 3 cities are not just catching up—they’re setting new benchmarks. Investors, developers, and policymakers would do well to keep their eyes firmly on these rising stars of Indian real estate.
