Union Budget's Rs 5,000 Crore City Economic Regions Plan to Boost Real Estate Beyond Metros
The Union Budget 2026’s proposal to create City Economic Regions (CERs) is expected to open up new real estate growth corridors across Tier-2 and 3 cities, along with temple towns. The government aims to drive region-based urban development backed by assured, multi-year infrastructure funding.
Market observers said that the move is set to reshape urban growth and real estate demand beyond metros. The focus on temple towns and tourism-led economies is likely to spur residential, rental housing, and retail development. Industrial and logistics-led CERs could drive demand for worker housing, industrial parks, and support infrastructure.
Union Finance Minister Nirmala Sitharaman, in her budget speech on February 1, emphasized that cities are India’s engines of growth. The government will now focus on smaller cities and temple towns that require modern infrastructure and basic amenities to unlock their economic potential.
According to government officials, under the plan, CERs will be mapped based on specific growth drivers—such as manufacturing, logistics, services, education, and tourism—to harness the economic power of agglomeration. “Each City Economic Region will receive Rs 5,000 crore over five years, with funds released through a challenge mode and a reform-cum-results-based financing mechanism. This encourages states and urban local bodies to accelerate infrastructure creation, connectivity, and civic upgrades,” officials said.
Impetus to Real Estate
Real estate developers said the CER framework could unlock planned urban expansion, driving demand for housing, commercial spaces, mixed-use projects, and hospitality assets in emerging cities. Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd, noted that urban development receives a sustained boost with an allocation of Rs 5,000 crore per year for five years for City Economic Regions, alongside a continued focus on Tier-2 and Tier-3 cities as emerging growth centers. “These measures will enable planned urbanization, support civic infrastructure, and unlock housing demand across new geographies,” he said.
Gurpal Singh Chawla, Managing Director, TREVOC Group, said that the sustained emphasis on capital expenditure and urban infrastructure in this Budget reinforces the government’s commitment to long-term economic growth. “The introduction of the City Economic Regions framework, with dedicated funding for Tier-2 and Tier-3 cities, is a structured step towards improving connectivity, civic amenities, and economic activity beyond metros. While immediate demand impact may be limited, this structural focus will gradually strengthen real estate fundamentals in emerging urban centers,” he said.
Experts said that the focus on smaller cities and religious centers is also likely to accelerate residential and rental housing demand, while supporting retail and hospitality development around tourism-led economies. Jaideep Ahuja, Managing Director and CEO, Ahuja Residences Private Limited, said that the continued year-on-year increase in public capex reflects a consistent commitment to building demand through infrastructure. “This directly supports both hotels and serviced apartments by enabling expansion into growth corridors where business travel and long-stay requirements are accelerating,” he said.
Shift to Region-Based Planning
Industry experts view CERs as a shift towards region-based urban planning, enabling better land use, transit-oriented development, and infrastructure-led real estate growth, while easing pressure on overcrowded metros. Manik Malik, CEO, BPTP said that the emphasis on infrastructure-led expansion across Tier-1 and Tier-2 cities is expected to support orderly urban growth and strengthen regional market fundamentals over time. “The continued focus on infrastructure creation, economic stability, and spatial development corridors provides a constructive policy backdrop for stakeholders across the real estate ecosystem, including developers, lenders, and homebuyers,” he said.
Experts said that if implemented effectively, CERs could strengthen real estate fundamentals in emerging markets over the medium to long term. Aditya Goel, Co-Founder, One Prastha Group, said that focusing on development in tier-2 cities would help in further expansion of amenities for customers and promote a healthy and sustainable environment for developers and customers. “Sustained capital expenditure and emphasis on infrastructure-led growth, urban development will further boost employment and strengthen the organization of the sector,” he said.
