Even in Tier 2 cities, rapid price rises mean affordability is shifting upward. Entry-level homes may still be affordable now, but continuous gains will push them out of reach for many.

India’s real estate landscape is undergoing a tectonic shift. Metro cities, which were once the go-to option for housing investment, are increasingly being outshone by Tier 2 and Tier 3 cities. Places like Lucknow, Indore, Jaipur, Bhubaneswar, Coimbatore, Patna, and Kanpur are seeing dramatic growth in property values.

The primary drivers are affordability, better infrastructure, increasing connectivity, and rising demand from homebuyers and investors searching for better living standards without metro-level costs.

Recent data shows that across 60 Tier 2 & 3 cities, housing sales rose 20% year-on-year, with value of sales jumping dramatically. These cities now account for nearly half of all land acquisitions by developers—an indicator that market sentiment and capital are actively shifting beyond traditional metros. (Land acquisitions by developers in non-metro cities now make up about 44% of the total in many reports.)

In another report, average capital appreciation in Tier-II cities is pegged at 17.6% year-on-year, significantly higher than many metro markets. Cities like Lucknow (23–24%), Indore (22–23%), Jaipur (21%), and Bhubaneswar (19.5%) are often cited as outperforming metro peers in terms of property price gains. Meanwhile, metros like Delhi, Mumbai and Chennai are registering lower rates of appreciation in many comparisons.

Why Is This Surge Happening?

Multiple interlocked reasons explain why property is booming in Tier 2 and 3 cities:

Infrastructure & Connectivity

New roads, highways, better rail networks, and improved air connectivity are shrinking the travel and time gap between smaller cities and metros. Government schemes for urban planning and connectivity—such as expressways, Smart Cities, metro corridors—are enhancing liveability and driving demand. When a city gains a modern airport or better civic infrastructure, it becomes more attractive for both end-users and investors.

Cost And Affordability

It is expensive to live in metros—not only in terms of property cost, but also the cost of commuting, maintenance, and daily expenses. In contrast, Tier 2 cities offer a much lower entry price per square foot. For the same money, buyers can get larger flats or nicer amenities in smaller cities. Even more, many people who once rented in metros are now able to buy in Tier 2 due to lower overall costs.

Remote Work And Lifestyle Shifts

The work-from-home trend and hybrid models have reduced the necessity of being physically present in metros. Buyers now value space, quality of life (less pollution, less crowding), and access to nature. This is prompting migration of demand away from large metro hubs to smaller cities with better environment and lower stress.

Developer Strategy & Investment Flow

With land in metros becoming scarce and expensive, developers are planting new projects in Tier 2 and 3 cities. Institutional and private investors are following. Data shows large rises in land acquisition and in new project launches in these cities. Also, housing projects in these regions have seen rapid growth in value even when volumes have increased more modestly—suggesting strong price appreciation.

Changing Buyer Aspirations

As incomes rise in non-metro cities, aspirations change. Middle-class buyers want modern amenities: gated societies, malls, good schools, and hospitals. They want a standard of living similar to metros but priced within reach. That shifts demand upward in these smaller cities. Investors, too, are more willing to bet on long-term gains in such cities.

How Tier 2 Cities Compare To Metros With Data

Here are some key comparisons to illustrate the scale of the shift:

Capital Appreciation: Tier-II cities average 17.6% year-on-year property appreciation, versus 11% in many metro markets.

Cities Outperforming: Lucknow (approximately 23.7%), Kanpur (19–20%), Jaipur (21.3%), Indore (22.8%), and Bhubaneswar (near 19.5%) are leading Tier 2 gains. In metros, gains are more modest in many cases.

Prices Per Square Foot: In Tier II cities, rates vary but are substantially lower than metros. For example, Kanpur properties may be around Rs 7,000 per sq ft in top micro-areas, while similarly sized homes in more central metro locations cost much more.

Sales Volume & Value Growth: In Top 15 Tier 2 cities, housing sales value increased to Rs 1.52 lakh crore in 2024 from around Rs 1.27 lakh crore in 2023, though the number of units sold rose modestly. Cities like Coimbatore saw value growth of 36%. Bhubaneswar recorded 47% jump in sales value year-on-year.

These facts show that while metros are still vital and dominant for premium segments, much of the growth momentum and new capital is coming from beyond.

A Closer Look At Bhubaneswar’s Housing Surge

Bhubaneswar offers a striking case study. Once known primarily as a city of temples and a hub for public administration, it is now being rebranded as a smart city. The Smart City Mission has pumped in funds for urban renewal, while IT-SEZs and educational institutions such as IIT Bhubaneswar have added to the city’s profile.

Property prices here average between Rs 4,500 and Rs 6,000 per sq ft in premium localities like Patia, Jaydev Vihar, and Khandagiri. Just five years ago, similar properties could be bought for 30–40% less. High demand from professionals, investors, and even NRIs from Odisha is sustaining the momentum.

Though Pune is often described as a Tier 1.5 city, it epitomises the growth trajectory of smaller markets. Once primarily an educational hub, Pune now houses IT parks, automobile plants, and start-ups. Its proximity to Mumbai and relatively lower costs gave it an edge.

Today, property rates in Pune’s prime locations like Kalyani Nagar, Baner, and Viman Nagar range between Rs 7,500 and Rs 10,500 per sq ft, comparable to some pockets of Mumbai suburbs. Demand is robust not only from locals but also from a steady influx of IT professionals.

Lucknow: Prices in Gomti Nagar and Shaheed Path have risen by over 20% in three years, driven by infrastructure upgrades and government jobs.

Indore: Known for its cleanliness and industrial base, Indore has seen property rates rise steadily, averaging Rs 4,500–Rs 5,500 per sq ft in prime areas.

Coimbatore: With its textile base and growing IT presence, Coimbatore has emerged as a strong residential market with property prices crossing Rs 6,000 per sq ft in hotspots.

Jaipur: Tourism, education, and proximity to Delhi have made Jaipur a magnet for real estate. Prime properties range from Rs 4,000 to Rs 6,000 per sq ft.

What This Means For The Future Of Housing?

This shift has implications for both buyers and the policy environment:

More Balanced Urban Growth

India’s growing population puts pressure on metros—traffic, pollution, and infrastructural strain. Growth in Tier 2 cities helps spread urbanisation more evenly. Over time, this might ease some of the affordability and liveability issues in big cities.

Rising Investor Interest and Speculation

As returns in Tier 2 cities outpace metros, investors are flocking in. That is good for development, but also could fuel speculative bubbles if supply (infrastructure, jobs) does not follow demand. Projects could overpromise, locations may become congested, and developers may face delays—leading to risk for buyers.

Housing Affordability Will Remain a Central Question

Even in Tier 2 cities, rapid price rises mean affordability is shifting upward. Entry-level homes may still be affordable now, but continuous gains will push them out of reach for many. So, housing policy, subsidies, and regulatory checks will need to work to ensure housing remains accessible, not just profitable.

Infrastructure Needs To Keep Pace

Connectivity, reliable utilities (water, power), good roads, schools, and health services will determine which Tier 2 cities succeed long-term. Without these, price gains may stagnate or reverse. Cities that fail to deliver infrastructure may see speculative bubbles burst.

Commercial Real Estate Growth Also Follows

It is not just residential demand. Office leasing in Tier 2 cities is growing too. As companies distribute their operations, setting up satellite offices and remote/hybrid workspaces, demand for Grade A office space is increasing in smaller cities. This further supports residential demand.

Role Of Government Policies

Policies like land use regulation, RERA enforcement, approval timelines, taxation, and infrastructural funding (roads, public transit, airports) will heavily influence how sustainable this growth is. Cities with strong governance will likely outperform poorly regulated ones.

What Prospective Homeowners And Investors Should Consider?

If you are considering buying property or investing in Tier 2 cities, here are key parameters:

Check location & connectivity: How far from transport hubs, highways, or upcoming infrastructure?

Track infrastructure projects: A new highway, airport expansion, or connectivity corridor can boost values.

Developer reputation & legal clearances: Crucial in newer cities. Delays or approvals can make or break returns.

Price trends over time: Look not just at last 6 months, but 2-3 years to understand the trajectory.

Lifestyle amenities: Schools, hospitals, malls, and green spaces are increasingly important to buyers and impact resale value.

Risk of oversupply/speculation: Ensure demand is real, not just investors. Some cities may flood with new units without demand to match.

What This Means for India’s Housing Landscape

The future of India’s real estate market is moving from being metro-centric to more decentralised. Tier 2 and 3 cities are no longer fringe or fallback; they are at the heart of India’s real estate growth story.

Metro cities will still have premium, luxury segments and remain valuable for many buyers and urban professionals. But for mass housing, mid-segment properties, and long-term investors, Tier 2 cities offer higher growth potential and better affordability today.

As more government investment goes into infrastructure and connectivity, remote work remains in some form, and incomes rise in non-metro areas, the trend is likely to sustain. The challenge for policymakers will be to ensure that infrastructure, governance, and housing regulation keep up so growth is sustainable and inclusive.