New Housing Supply in Tier-II Cities Drops 35% in Q4, Developers Pivot to Premium Segments
New residential launches in India's top 15 tier-II cities saw a significant 35% decline in the January-March quarter, as developers adjust to rising costs and selective demand.
Housing SupplyTierii CitiesReal EstatePremium HomesMarket TrendsReal Estate NewsJun 17, 2025
The decline in supply is a result of a cautious approach and shifting priorities by developers. Financially robust players are now focusing on premium housing to improve profit margins,” said Samir Jasuja, Founder and CEO of PropEquity, as quoted by PTI.
Among the cities tracked, Ahmedabad saw the largest absolute volume drop — down 35% to 11,096 units from 17,108 units a year earlier. Surat recorded a 39% fall, while Jaipur saw a 55% plunge. Bhubaneshwar and Trivandrum experienced some of the steepest declines, dropping 72% and 71% respectively.
Other cities with major cuts in supply included:
- Lucknow: down 55% to 1,026 units
- Mangalore: down 64% to 269 units
- Bhopal: down 51% to 365 units
- Kochi: down 49% to 225 units
- Nagpur: down 28% to 1,036 units
- Vadodara: down 23% to 2,149 units
- Goa: down 24% to 444 units
- Gandhinagar: down 10% to 4,356 units
- Nashik: down 2% to 2,466 units
Coimbatore was the only city to buck the trend, with new supply more than doubling to 1,077 units, up from 475 last year.
Rajat Khandelwal, Group CEO of Tribeca Developers, attributed the shift to “rising input costs, tighter funding, and selective demand in these markets,” adding that developers were becoming more deliberate about launch pipelines.
Kirthi Chilukuri, Founder and MD of Stonecraft Group, said the contraction signals a transformation phase. “This marks a turning point that holds immense potential. We see it as an opportunity to pioneer sustainable, biophilic housing that aligns with modern living,” he said.
Vijay Harsh Jha, Founder of VS Realtors, noted a shift in demand toward higher-end properties. “Tier-II cities are moving toward premiumisation. Homes priced at Rs 1–2 crore are in demand, while those around Rs 50 lakh are seeing slower movement — a concern given the inflow of job-seekers in these cities,” he said.
Despite the short-term contraction in supply, Jha said the broader real estate sentiment in tier-II cities remains strong. “This is a temporary correction,” he added.
Frequently Asked Questions
What is the main reason for the decline in new housing supply in tier-II cities?
The main reasons for the decline in new housing supply in tier-II cities include rising input costs, tighter funding, and selective demand in these markets.
Which city saw the largest absolute volume drop in new housing units?
Ahmedabad saw the largest absolute volume drop in new housing units, down 35% to 11,096 units from 17,108 units a year earlier.
What is the trend in demand for housing in tier-II cities?
There is a trend toward premiumisation in tier-II cities, with homes priced at Rs 1–2 crore in high demand, while those around Rs 50 lakh are seeing slower movement.
How are developers responding to the current market conditions?
Developers are becoming more deliberate about their launch pipelines and are focusing on premium housing to improve profit margins.
What is the broader sentiment about the real estate market in tier-II cities?
Despite the short-term contraction in supply, the broader real estate sentiment in tier-II cities remains strong, and this is seen as a temporary correction.
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