Tier-2 Housing Sales Decline 10% in 2025 as Prices Surge and Premium Homes Gain Traction

Housing sales volumes across India’s top 15 tier-2 cities declined by 10% year-on-year in 2025, dropping to 1,56,181 units. Despite this, the total value of homes sold remained flat at Rs 1.48 lakh crore, according to data released by real estate analytics firm PropEquity. This trend highlights rising property prices and a growing preference for premium homes in these markets.

While most cities saw a slowdown, Mohali and Lucknow bucked the trend, recording growth in sales volumes of 34% and 6%, respectively. The remaining 13 cities witnessed declines of up to 38%, with Visakhapatnam posting the steepest fall.

The data points to a clear shift towards higher-priced homes. Sales of houses priced below Rs 1 crore fell 15% year-on-year in 2025, with their share in total sales dropping to 72% from 77% in 2024. In contrast, homes priced above Rs 1 crore recorded a 9% increase in sales, with their share rising to 28% from 23% a year earlier.

In absolute terms, Gujarat’s four cities — Ahmedabad, Gandhinagar, Vadodara, and Surat — accounted for 63% of total housing sales across the top 15 tier-2 markets. Ahmedabad alone contributed 33%, with 51,148 units sold in 2025, despite an 8% decline from the previous year.

PropEquity said Ahmedabad has effectively outgrown its tier-2 classification and should be regarded as a tier-1 city from 2026, having surpassed several established tier-1 markets in both housing launches and absorption. “With its scale of development and depth of demand, the city now rightfully merits inclusion among India’s tier-1 urban centres,” the report said.

Commenting on the trend, Samir Jasuja, Founder and CEO of PropEquity, said the slowdown in housing sales over the past two years has largely been driven by a shrinking supply of homes priced below Rs 1 crore, a segment that traditionally fuels demand in tier-2 cities. “Rising land and construction costs, along with changing buyer aspirations, are pushing new launches into higher price brackets. As a result, tier-2 markets are increasingly mirroring tier-1 cities, where volumes are declining even as prices continue to rise,” Jasuja said.

He added that sustained price appreciation in tier-2 cities has been supported by government-led infrastructure push, including improved connectivity, urban development, and the creation of industrial corridors and manufacturing hubs. However, this has also pushed average home prices in several markets beyond the Rs 1 crore threshold, slowing absorption. “Going forward, this trend could be a cause for concern, as affordability pressures begin to impact not just premium segments but also affordable and mid-income housing in these cities,” Jasuja said.

On the supply side, new housing launches across the top 15 tier-2 cities fell 6% year-on-year to 1,36,243 units in 2025, compared with 1,45,139 units in 2024. The contraction was seen across price segments, with supply of homes priced below Rs 1 crore declining 5%, while launches in the above Rs 1 crore category fell 8%.

Among individual cities, Mohali (108%) and Bhopal (66%) recorded the sharpest growth in new supply, followed by Ahmedabad (3%) and Jaipur (2%). The remaining 11 cities saw a decline in launches of up to 57%, with Bhubaneswar witnessing the steepest fall.

Gujarat’s four cities once again dominated the supply landscape, accounting for 64% of total new launches across the top 15 tier-2 markets in 2025, underscoring the state’s growing importance in India’s residential real estate cycle.

Lalit Parihar, managing director of Dholera-based real estate firm Aaiji Group, said, “Ahmedabad has witnessed a measured yet healthy housing price growth, reflecting the city’s fundamentally strong, end-user-driven real estate market. The proposed inclusion of Ahmedabad in the list of metro cities eligible for a higher 50% House Rent Allowance (HRA) exemption under the draft Income Tax Rules, 2026, is a significant positive and will further enhance rental affordability while supporting housing demand.”

The city continues to see steady residential sales and disciplined new launches, indicating a mature and balanced market. With major infrastructure upgrades underway and the upcoming Commonwealth Games acting as a catalyst for urban development, Ahmedabad’s real estate ecosystem is well-positioned for sustainable growth, he added.

“Driven by genuine demand, improving connectivity, and sustained economic momentum across Gujarat, this steady appreciation reinforces Ahmedabad’s position as one of India’s most affordable, resilient, and stable housing markets for both homebuyers and long-term investors,” Parihar said.