Why Tier-2 Cities Are Emerging as India's Top Second-Home Investment Hotspots
The second home sector in India has experienced tremendous growth over the past several years. Historically, buyers would typically buy a vacation home or an investment property, usually located in high-altitude or beachfront locations such as Shimla, Goa, or Ooty. Now, buyers are beginning to look closer to home for their second homes and are taking an interest in Tier 2 cities within India. Tier 2 cities such as Lucknow, Jaipur, Chandigarh, Coimbatore, Indore, and Nagpur are becoming increasingly desirable locations for NRIs, HNIs, and urban professionals due to their offered levels of comfort, convenience, and affordability.
The biggest drivers of Tier 2 cities’ attractiveness are the affordability and value of the residential real estate options available to them. Many Tier 2 cities are providing affordable residential options such as modern apartments and large villas that cost significantly less than similar properties in metropolitan areas. The total volume of home sales in 30 Tier 2 cities reached 2.08 Lakh in FY 2023 to FY 2024, an increase of 11% compared to FY 2022. By value, the top 15 non-metro cities experienced a 20% increase in total value across the range of properties they sold, with total sales amounting to Rs. 1.52 Lakh Crore.
Governance enhancements related to highways and expressways, as well as improvements to regional airports and upgrades to regional rail lines, have made it easier for Tier II city residents to travel between larger cities and Tier 1 metropolitan areas. The interconnectedness has improved travel time and made it easier for Tier II second home buyers and owners to enjoy weekend getaways. As a result, residents living in Tier II cities are able to breathe cleaner air, live in quieter neighborhoods, and have nearby access to all modern conveniences, including good educational institutions and healthcare facilities, while being surrounded by beautiful natural surroundings. They live in communities that encourage healthy living via remote work and quality family time.
Investors are increasingly viewing Tier 2 cities as emerging hotspots with a high potential for capital appreciation. In addition to the capital appreciation potential, property prices are rising in Tier 2 cities due to increased demand and improved infrastructure, creating substantial returns for early investors in the form of second homes in Tier 2 cities. High-net-worth individuals are increasingly purchasing second homes in leisure and hill station locations, including but not limited to Shimla, Manali, Kasauli, Dehradun, Rishikesh, and coastal areas such as Goa and Alibaug.
What makes Tier 2 cities favorable for second home investments? Here’s a comparison:
| Factors | Tier 1 Metro (Mumbai, Delhi, Bangalore, etc.) | Tier 2 Cities (Lucknow, Coimbatore, Chandigarh, etc.) | |---------|-------------------------------------------------|-------------------------------------------------------| | Property Prices | Very high ticket sizes, limited space for second homes | Lower entry costs, larger units and plots | | Lifestyle | Congestion, pollution, long commutes | Quieter neighborhoods, better air, closer to nature | | Investment Appeal | Mature, expensive markets with slower upside in some pockets | Growing markets with rising sales and double-digit price growth in key cities | | Connectivity | Strong but crowded infrastructure | Rapidly improving through new highways, airports, and industrial corridors | | Buyer Segment | End users, investors, corporate professionals | Mix of local aspirational buyers, metro professionals, NRIs, and HNIs seeking second homes |
An individual may wish to buy a second home for multiple reasons, including mountain views and beach sunsets. However, the Tier 2 cities of India have quickly evolved to become very competitive and welcoming for those looking for second homes. Today, many Tier 2 cities provide the same opportunities for affordability, connectivity, quality of life improvements, and strong investment potential that Tier 1 cities offer, but with a much more affordable price tag. It is no wonder why many individuals are now exploring the potential to buy a second home as an opportunity to escape urban pressure and relocate to more tranquil areas away from their existing residence.
