Real Estate Investors Shift Focus to Tier 2 and Tier 3 Cities Amid Strong Growth
India's real estate market is witnessing a robust shift as investors from metro cities increasingly look towards Tier 2 and Tier 3 hubs, driven by rapid infrastructure development and economic stability.
Real EstateTier 2 CitiesTier 3 CitiesInfrastructure DevelopmentInvestment TrendsReal Estate NewsSep 14, 2025
Improving connectivity, rising urban migration, and government-led initiatives are making these emerging markets more attractive for both residential and commercial investments.
Observing current trends, Bhupindra Singh, COO of RISE Infraventures, noted that investors from Tier 1 cities are increasingly eyeing Tier 2 and 3 towns in pursuit of higher growth and potential double-digit returns. He added that this shift reflects a growing risk appetite among investors who see strong upside in emerging real estate markets beyond the metros. However, he emphasised that “metros will continue to dominate overall investments.”
The COO of RISE Infraventures, which recently announced its strategic foray into the leasing verticals, said, “Tier 2 cities are attracting growing interest from investors, largely driven by infrastructure development. This trend is expected to continue and gather momentum in the coming years.”
“Tier 2 and Tier 3 cities will see increasing traction and stronger numbers. While they may still represent a smaller share compared to metros, the growth in investor activity in these cities is undeniable,” he added.
Interestingly, he pointed out that investors from Tier 2 and Tier 3 cities are preferring Tier 1 markets due to the stable income, even if the returns are lower. “So, it's essentially a function of need—Tier 1 investors seek aggressive returns, while Tier 2 and Tier 3 investors prioritize stability,” he added.
Singh added that current investor-friendly policies, favourable interest rates, and an overall positive sentiment will push the sector into full flight and are expected to continue for the next 10-15 years. With its foray into the leasing segment, RISE also channels investments from UHNIs and family offices into pre-leased and income-generating assets.
India's real estate market witnessed robust performance under office demand as well as residential sales, driven by economic stability and positive market sentiment. The demand for real estate is emerging not only in tier 1 and tier 2 cities but across the country due to the expansion of metro networks, enhancements to road networks, and improvements in connectivity.
According to the Finance Ministry, housing demand in India is expected to touch 93 million units by 2036. The Indian real estate sector has attracted nearly USD 80 billion in institutional investments over the past 15 years, since 2010, as per the latest report by Colliers-CREDAI. Foreign capital continues to dominate, contributing 57 per cent of total inflows during these years.
Interestingly, domestic capital has been emerging as a key driver post-pandemic, indicating a substantial shift in the investment landscape across asset classes. India's real estate sector has evolved significantly, from a largely fragmented and unorganised sector in the 1990s to a more transparent and accountable growth driver today.
Over the years, its contribution to India's Gross Domestic Product (GDP) has steadily increased from less than 5 per cent before 2010 to around 6-8 per cent in recent years. The sector contributed nearly USD 0.3 trillion in terms of value added to the Indian economy in 2025.
Frequently Asked Questions
Why are real estate investors shifting focus to Tier 2 and Tier 3 cities?
Real estate investors are shifting focus to Tier 2 and Tier 3 cities due to rapid infrastructure development, improving connectivity, and rising urban migration, making these markets more attractive for both residential and commercial investments.
What are the key factors driving the growth of Tier 2 and Tier 3 cities?
The key factors driving the growth of Tier 2 and Tier 3 cities include government-led initiatives, improved infrastructure, better connectivity, and rising urban migration, which are making these cities more viable for real estate investments.
How are investor preferences different between Tier 1 and Tier 2/3 cities?
Investors from Tier 1 cities seek higher returns and are more aggressive, while investors from Tier 2 and Tier 3 cities prioritize stability and stable income, even if the returns are lower.
What role do government policies play in the real estate sector's growth?
Government policies, such as investor-friendly measures, favourable interest rates, and positive market sentiment, play a crucial role in driving the growth of the real estate sector by making it more attractive for both domestic and foreign investors.
What is the expected future of the real estate sector in India?
The real estate sector in India is expected to continue growing, driven by increasing housing demand, infrastructure development, and a shift towards more transparent and accountable practices. The sector is projected to contribute significantly to the country's GDP in the coming years.
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