Housing Sales in Tier-2 Cities Decline 10% in 2025 Amid Affordability Issues and Rising Prices
India's tier-2 housing markets experienced a noticeable slowdown in 2025, with home sales declining for the second consecutive year. Rising prices and a shrinking affordable supply have weighed heavily on demand. According to data from real estate analytics firm PropEquity, housing sales across the top 15 tier-2 cities dropped 10% year-on-year to 1,56,181 units, while the total value of homes sold remained flat at ₹1.48 lakh crore.
The flat value alongside lower volumes points to higher ticket sizes rather than stronger demand, indicating that price growth and premiumisation are masking a broader slowdown in housing absorption.
Sales volumes declined in 13 of the 15 cities tracked, with falls of up to 38%. Visakhapatnam saw the steepest decline, followed by sharp drops in cities such as Bhubaneswar, Vadodara, and Nagpur. Only Mohali and Lucknow bucked the trend, recording volume growth of 34% and 6%, respectively. Overall absorption dropped from 1,72,599 units in 2024 to 1,56,181 units in 2025, underscoring weakening momentum across most tier-2 markets.
The slowdown has been driven largely by a contraction in the sub-₹1 crore housing segment, which has traditionally accounted for the bulk of demand in tier-2 cities. Sales of homes priced below ₹1 crore declined 15% YoY in 2025, with their share in total sales falling to 72% from 77% in the previous year. In contrast, homes priced above ₹1 crore saw a 9% increase in sales, with their share rising to 28% from 23%. This shift suggests that while end-user demand is weakening, higher-income buyers are continuing to transact, pushing up average deal values.
Gujarat continued to dominate tier-2 housing activity, with Ahmedabad, Surat, Vadodara, and Gandhinagar together accounting for 63% of total sales across the top 15 cities. Ahmedabad alone contributed one-third of total absorption, with 51,148 units sold during the year, despite an 8% YoY decline. Surat and Vadodara recorded sharper contractions of 15% and 19%, respectively, while Gandhinagar remained broadly flat. PropEquity noted that Ahmedabad’s scale of launches and absorption now places it closer to tier-1 markets, reflecting how select tier-2 cities are increasingly behaving like larger urban centres.
The demand slowdown has been accompanied by a pullback in new supply. Housing launches across the top 15 tier-2 cities declined 6% YoY to 1,36,243 units in 2025. Supply fell across price segments, with launches of homes priced below ₹1 crore down 5%, while supply in the above-₹1 crore segment declined 8%. This indicates growing caution among developers amid slower sales and rising input costs. Only four cities — Mohali, Bhopal, Ahmedabad, and Jaipur — recorded an increase in new launches, while the remaining 11 saw declines of up to 57%. Bhubaneswar experienced the steepest fall in supply, followed by Visakhapatnam and Lucknow. Once again, Gujarat led on the supply side, with its four cities accounting for 64% of total launches in 2025.
According to PropEquity, the persistent slowdown is being driven by rising land and construction costs, which are pushing new launches into higher price brackets. As a result, homes that once fell within affordable or mid-income ranges are increasingly being priced above ₹1 crore, limiting the pool of buyers. Government-led infrastructure development and improved connectivity in tier-2 cities have supported price appreciation, but this has also reduced affordability, particularly for first-time buyers. Analysts caution that unless supply in lower price brackets improves, the pressure on sales volumes could intensify, even as headline values remain stable. The data suggests that tier-2 housing markets are entering a more mature phase, where price growth is outpacing volume expansion — a shift that could reshape demand dynamics in the coming years.
