Real Estate Developers Target Tier-2 and Tier-3 Cities: 44% of 3,294 Acres Acquired in 2024

The landscape of Indian real estate is evolving rapidly, with developers increasingly shifting their focus towards Tier-2 and Tier-3 cities. A recent report by CREDAI-Liases Foras, based on research covering 60 major Indian cities, reveals that 44% of the 3,294 acres of land acquired by real estate developers in 2024 were concentrated in these emerging markets. This shift not only signals a significant change in investment patterns but also underscores the potential of these cities to drive the next phase of urbanization in India.

Shifting Investment Focus: Why Tier-2 and Tier-3 Cities?

For years, metros like Delhi-NCR, Mumbai, and Bangalore dominated real estate investments. However, factors such as affordability, improved infrastructure, and proactive government initiatives are making Tier-2 and Tier-3 cities increasingly attractive. With rising urbanization and connectivity, cities like Ahmedabad, Nashik, Nagpur, Jaipur, and Lucknow are emerging as promising destinations for property development.

The report highlights that housing sales in 2024 reached 681,138 units across 60 cities, marking a 23% year-on-year increase. The primary developers' market recorded a sales value of ₹7.5 trillion, reflecting an impressive 43% YoY growth. Interestingly, while luxury and ultra-luxury segments continue to drive demand in metros, these emerging markets are witnessing robust growth in mid-range and affordable housing, ensuring a more balanced market dynamic.

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City-Wise Housing Price Index Trends

The study provides detailed insights into the House Price Index (HPI) trends across various cities. Below is a summary table that captures the HPI data for key cities:

The above data illustrates the diverse trends in Indian real estate across major cities. While metros like Mumbai and Bengaluru are showing steady to strong growth, many Tier-2 and Tier-3 cities are witnessing significant improvements in their HPI, indicating a surge in investor confidence and market potential.

Drivers Behind the Shift

Several factors are driving real estate developers to target Tier-2 and Tier-3 cities:

• Affordability: Lower land and property costs in these cities make them attractive for both developers and first-time homebuyers.
• Government Initiatives: Programs such as the Prime Minister’s Gati Shakti mission are enhancing connectivity between satellite towns and major metropolitan centers, unlocking new growth opportunities.
• Economic Diversification: Emerging markets are evolving into academic, logistics, and industrial hubs, boosting housing demand across various segments.
• Balanced Market Dynamics: The mix of luxury, mid-range, and affordable housing in these regions is creating a more balanced and sustainable market.

Impact on the Real Estate Market

The increasing focus on Tier-2 and Tier-3 cities is expected to have multiple positive effects on the Indian real estate market:

• Enhanced Investment Opportunities: With nearly half of all land acquisitions shifting to these regions, developers can tap into a vast pool of untapped potential, leading to robust growth in residential and commercial segments.
• Rising Property Values: As infrastructure improves and connectivity increases, property values in these cities are poised to rise, offering significant returns for investors.
• Market Expansion: The growth of these emerging cities will not only attract domestic investors but also international buyers, contributing to the overall economic development of the region.
• Sustainable Urbanization: A more balanced distribution of real estate development across metros and emerging cities will help reduce the pressure on over-saturated markets, paving the way for more inclusive urban growth.

Conclusion

The focus on Tier-2 and Tier-3 cities by real estate developers marks a paradigm shift in Indian real estate. With 44% of the 3,294 acres of land acquired in 2024 concentrated in these emerging hubs, the potential for sustainable growth is immense. Detailed insights into housing price trends reveal that cities like Ahmedabad, Nagpur, and Lucknow are experiencing notable improvements, signaling renewed investor confidence. As developers continue to explore new opportunities beyond traditional metro markets, the future of Indian real estate looks promising, with inclusive growth and diversified investments set to drive the next wave of urban transformation.

Stay tuned for further updates on how these trends shape the evolving real estate landscape in India, and explore the new opportunities emerging in Tier-2 and Tier-3 cities.

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