Tier 2, 3 Cities to Lead Next Housing Market Growth Cycle, Says Report
NEW DELHI: India’s tier II-III cities are expected to drive the next cycle of growth in the housing market as demand in big cities has been affected due to a surge in home prices post-COVID pandemic, according to Square Yards.
Real estate consultant Square Yards has come out with a report titled ‘India’s Next Real Estate Growth Cycle: The Rise of Tier-2 and Tier-3 Cities’. The report points out that affordability to buy homes across major cities has been impacted badly because of a significant price rally during 2022-24.
Limited new supply of affordable and mid-income homes in the seven major cities - Mumbai Metropolitan Region, Pune, Bengaluru, Delhi-NCR, Hyderabad, Chennai, and Kolkata - has made matters worse. “India’s residential market is entering a structurally distinct phase. The post-pandemic premium cycle that powered accelerated price appreciation across metro markets is now showing signs of stabilisation,” the report noted.
In several tier 1 corridors, the price growth has outpaced income expansion, resulting in visible affordability compression and a gradual tempering of incremental demand at higher ticket sizes. The consultant mentioned that the next phase of growth in India’s housing market would come from tier II and tier III cities. In contrast, emerging cities are exhibiting a more sustainable growth configuration. These markets offer lower entry ticket sizes and stronger price-to-income alignment, creating a more accessible ownership landscape.
Employment expansion beyond metros is broadening the residential demand base, the consultant said, adding that the housing demand in these smaller cities is largely end-user driven. The report has listed cities such as Bhubaneswar, Cuttack, Erode, Puri, Varanasi, and Visakhapatnam to spearhead the next growth cycle.
These cities are expected to attract more investments and see a steady rise in property developments, driven by factors like better infrastructure, improved connectivity, and government initiatives to promote urbanization. The shift in focus towards tier II and tier III cities is also supported by the growing trend of remote working, which has made it more viable for people to live in smaller towns while working for companies based in larger cities.
The report underscores the importance of these emerging markets in shaping the future of India’s real estate sector. With the right policies and investments, these cities have the potential to become the new hubs of residential and commercial real estate development.
