India's Real Estate Boom Shifts to Tier II and III Cities

The real estate market in India is witnessing a significant shift, with Tier II and III cities becoming the new hotspots. Discover why these smaller towns are attracting buyers and investors.

Real EstateTier Ii CitiesTier Iii CitiesProperty PricesInfrastructureReal Estate NewsMay 23, 2025

India's Real Estate Boom Shifts to Tier II and III Cities

Real Estate News:Real estate action is quietly shifting to Tier II and Tier III cities. From Indore to Warangal, Jaipur to Ujjain, these smaller towns are no longer just hometowns people leave behind – they’re turning into real estate hotspots.

When Amit, a 35-year-old software professional from Jaipur, shifted back from Pune during the pandemic, he didn’t plan on staying. “I thought it was temporary. But when I saw how fast Jaipur was growing – the roads, the malls, the schools – I realised I could live well here. I even bought a flat,” he says. And he isn’t alone. In cities like Lucknow, Bhubaneswar, and Nagpur, new housing projects are coming up rapidly. Prices are more reasonable, and people are looking for space, comfort, and better air – something Tier I cities are finding hard to offer.

Here’s a look at some Tier II cities where residential property prices have gone up in the past year:

| City | Price Growth (YoY) | Popular Areas |
|-----------|---------------------|---------------------------|
| Indore | 13% | Vijay Nagar, Bypass Road |
| Lucknow | 11% | Shaheed Path, Gomti Nagar|
| Bhubaneswar | 9.5% | Patia, Kalinga Nagar |
| Nagpur | 9% | Wardha Road, MIHAN |
| Jaipur | 8.5% | Mansarovar, Ajmer Road |

These cities are expanding rapidly because of better infrastructure, job opportunities, and growing local industries. Also, people who moved back during COVID-19 often chose to settle down, boosting the housing demand.

Not just Tier II, even Tier III cities – usually smaller, less urbanised places – are seeing real estate movement. What was once considered “too remote” is now getting buyers, especially from people who want to return to their roots or buy second homes. People here don’t want to live in rental homes anymore. They’re looking for decent housing with good water, electricity, and security – and they’re willing to pay for it.

Take a look:

| City | Reason for Growth | Recent Developments |
|-----------|-------------------------------------------|-----------------------------------------|
| Warangal | Textile industry, new highways | NH-163 connectivity, IT parks |
| Ujjain | Tourism, spiritual appeal | Temple town upgrades, ring roads |
| Varanasi | Railway, tourism, infra boost | Airport, metro project, temples |
| Nanded | Education, pharma | New townships, ring road expansion |
| Siliguri | Logistic hub, gateway to NE India | Highway upgrades, freight corridor |

The real change in India’s smaller cities didn’t happen overnight. Over the past few years, there’s been a quiet but steady push to improve life in Tier II and Tier III towns. Roads are better, public transport is growing, and more flights are now connecting places that were once considered remote.

Take the UDAN scheme, for example. Thanks to this government initiative, towns like Warangal, Nanded, and Siliguri now have direct flights to metro cities. This has made it easier for businesspeople, tourists, and professionals to travel without spending half a day on the road. New highways and bypasses are also helping, cutting down travel time and opening up land on the city outskirts for housing.

At the same time, there’s been a big focus on basics—clean drinking water, better sewage systems, and smoother roads. Under the Smart Cities Mission, towns like Indore, Bhubaneswar, and Ujjain have seen real change. Add to that new schools, hospitals, and local job opportunities, and suddenly these towns feel like proper cities.

When people see they don’t need to move to Delhi or Mumbai for a good life, they choose to stay back—and that’s exactly what’s pushing real estate demand through the roof in these smaller towns.

So, what’s driving this trend?

- Affordability : A 2BHK in Indore costs ₹40–50 lakh. In Mumbai? At least ₹1.5 crore.
- Better Lifestyle : Less pollution, more space, and less traffic.
- Government Push : Schemes like Smart City, PMAY, and regional airport connectivity are making these towns more livable.
- Job Growth : IT parks in Coimbatore, logistics in Siliguri, and education hubs in cities like Nanded are generating local employment.

What builders and investors are saying

Builders are entering these cities more cautiously, but confidently. “We don’t need massive towers in Ujjain. But there’s enough demand for mid-size gated communities,” said a Pune-based developer who recently launched a project in Tier III Maharashtra towns. Investors, too, are taking note. While returns might be slower, the entry costs are lower and the risks are more manageable.

What the future looks like

India’s future doesn’t lie only in the skyscrapers of Mumbai or the tech corridors of Bengaluru. It’s equally about the clean streets of Lucknow, the new bypass roads in Warangal, and the gated societies popping up in Bhubaneswar. Real estate isn’t just about buildings – it’s about people. And right now, people in smaller towns are ready to buy, build, and grow. If you’re looking for where the next property boom is happening, you might want to stop looking at the skyline and start looking at the heartland.

Frequently Asked Questions

What are the main reasons for the real estate boom in Tier II and III cities?

The main reasons include better infrastructure, more affordable housing, improved quality of life, and government initiatives like the UDAN scheme and Smart Cities Mission.

Which cities have seen significant growth in property prices?

Cities like Indore, Lucknow, Bhubaneswar, Nagpur, and Jaipur have seen significant growth in property prices, with increases ranging from 8.5% to 13% in the past year.

How has the UDAN scheme impacted smaller cities?

The UDAN scheme has improved connectivity by providing direct flights to smaller cities like Warangal, Nanded, and Siliguri, making travel easier and boosting local economies.

What are the key drivers of property demand in Tier II and III cities?

Key drivers include affordability, better lifestyle, government initiatives, and job growth in sectors like IT, logistics, and education.

What are the future prospects for real estate in smaller cities?

The future looks promising with continued government support, infrastructure development, and increasing demand from people looking for a better quality of life away from crowded metros.