Gen Z Fuels Real Estate Boom in Tier II-III Indian Cities
Real estate developers in India are adapting to the changing aspirations of Gen Z by ramping up projects in Tier II and III cities. This shift is driven by the growing demand for modern amenities and tech-enabled workspaces.
Real EstateGen ZTier Ii CitiesCommercial ProjectsInvestmentReal Estate NewsMay 25, 2025
Luxury cafes, fine dining restaurants, gaming centres, salons, malls, and exhibition centres are booming in tier II and tier III cities, driven by the growing demand for such amenities. Real estate players are capitalizing on these opportunities, recognizing the significant shift in lifestyle and preferences among the younger generation.
The commercial real estate sector is undergoing a generational transformation as the baton passes from baby boomers, Gen X, and millennials to the tech-savvy, environmentally conscious, and entrepreneurial Gen Z. Real estate players are closely monitoring the lifestyle of Gen Zs, the term coined for individuals born between 1997 and 2012, as their demands differ significantly from other generations.
"Gen Z culture is far more mature today. Thanks to the world of technology, we are far more mature. Today, the youth of Punjab, apart from good families, think that even in the middle-income group, the children are studying all across India and the world. They're coming back, and they have huge aspirations. Their lives, if you come and see, are really world-class," said Adish Oswal, CMD, Oswal Group. His Vardhman Amrante group recently announced it would invest ₹1,350 Crores in Punjab's real estate, focusing on Ludhiana and other cities. The investment will be distributed across multiple real estate segments, including commercial, residential, hospitality, industrial, and other allied sectors.
Observing the trends in non-metro cities, Santosh Agarwal, Executive Director and CFO at Alpha Corp, said, "Gen Z is reshaping the commercial real estate landscape, particularly in Tier 2 and 3 cities like Amritsar, Karnal, and Meerut. These emerging hubs are benefiting from better infrastructure, enhanced connectivity, and a growing appetite for modern, tech-enabled workspaces."
According to the India Brand Equity Foundation (IBEF), the real estate sector shows promise with a projected 9.2 per cent CAGR from 2023 to 2028. Shrinivas Rao, FRICS, CEO, Vestian, said that regional developers have ramped up activity in these emerging locations, delivering customised commercial assets that meet the evolving needs of the new workforce.
"Simultaneously, leading Grade-A developers from Tier-1 cities have expanded into non-metros to tap into this growing demand and strengthen their presence in these high-potential markets," he added. The demand for office space in Tier II and III cities is propelled by decentralised work models, infrastructure development, and the availability of a skilled workforce.
Approximately 15 per cent of India's tech talent currently resides in these smaller cities, highlighting their growing role in the talent landscape. Vimal Nadar, National Director & Head, Research at Colliers India, says that the growth of startups in Tier II cities has further boosted commercial real estate demand.
"Recognising the inherent growth potential, leading real estate developers are increasingly venturing into Tier II and III cities with high-quality offerings across asset classes, including commercial real estate," he added. Nadar further added that these smaller cities are likely to become the next growth engines for India's office market and supplement the established Tier I markets.
Frequently Asked Questions
What is driving the real estate boom in Tier II and III cities?
The real estate boom in Tier II and III cities is driven by the changing aspirations of Gen Z, who demand modern amenities and tech-enabled workspaces. This is further supported by infrastructure development and the availability of a skilled workforce.
How is Gen Z reshaping the commercial real estate landscape?
Gen Z is reshaping the commercial real estate landscape by demanding amenities such as luxury cafes, fine dining restaurants, gaming centres, and modern workspaces. Their tech-savvy and environmentally conscious nature is influencing the design and functionality of new real estate projects.
What are some key investments being made in Tier II and III cities?
Key investments in Tier II and III cities include luxury cafes, fine dining restaurants, gaming centres, salons, malls, and exhibition centres. For example, the Vardhman Amrante group recently announced a ₹1,350 Crore investment in Punjab's real estate, focusing on Ludhiana and other cities.
What is the projected growth of the real estate sector in India?
According to the India Brand Equity Foundation (IBEF), the real estate sector in India is projected to grow at a CAGR of 9.2 per cent from 2023 to 2028.
How are leading real estate developers adapting to the new market trends?
Leading real estate developers are adapting to the new market trends by expanding into Tier II and III cities with high-quality offerings across various asset classes, including commercial, residential, hospitality, industrial, and other allied sectors. They are also focusing on customised commercial assets that meet the evolving needs of the new workforce.
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