India’s real estate market saw robust growth in Tier-2 and Tier-3 cities, with residential prices across 11 cities rising 63 per cent between 2021 and 2026, compared with 42 per cent growth in the country’s top eight cities.
According to the Confederation of Indian Industry (CII) and Knight Frank India report, the reason for this growth is a strong MSME ecosystem, availability of a talent pool, coinciding with a stronger services base in several emerging cities and GCCs widening the office map, among others.
The cities of Bhopal, Bhubaneswar, Chandigarh Tricity, Goa, Indore, Jaipur, Kochi, Lucknow, Nagpur, Visakhapatnam and Coimbatore recorded an average residential price CAGR of 8 per cent between 2016 and 2026, compared with 4 per cent across the top 8 cities.
While the top eight cities will continue to anchor the sector given their volume, Tier-2 and Tier-3 cities are becoming increasingly important growth anchors.
India’s real estate sector output is projected to reach USD 5.8 trillion by 2047, with Tier-2 and Tier-3 cities estimated to contribute 25–30 per cent, representing USD 1.4–1.7 trillion in output. Realising this opportunity will require infrastructure that generates employment and enterprise, supported by demand-led formal supply, serviced land, efficient approvals, reliable utilities and liveable urban conditions.
The share of infrastructure expenditure in total government capital expenditure has increased from 39 per cent in FY15 to 55 per cent in FY26. As the government increases its commitment to infrastructure, the base for private capital has been fortified in the last decade, leading to a growing role of public-private partnerships.
The government’s three-year PPP pipeline comprises 852 projects with a combined cost of Rs 17 lakh crores. Many of these projects will have a long-term positive impact on the growth of the two markets.
International Partner, Chairman and Managing Director, Knight Frank India, Shishir Baijal said, “India’s real estate growth is increasingly broadening beyond the traditional metropolitan centres. The investable opportunity across Tier-2 and Tier-3 cities, satellite markets and emerging corridors will be shaped not simply by infrastructure creation, but also by their ability to convert connectivity into sustained economic activity."
"Cities that bring together employment, enterprise, population growth, consumption and urban capacity will be better placed to build deeper and more diversified real estate markets," Baijal said.
"For investors and developers, this represents a wider opportunity landscape, but one that requires greater selectivity and a sharper understanding of each market’s underlying economic drivers," Baijal added.
In 2025, key Tier-2 markets recorded 11.2 million sq ft of warehousing lease transactions, broadly stable compared with 11.4 million sq ft in 2024. Of these, the selected next real estate markets of Lucknow, Jaipur, Nagpur, Indore, Coimbatore and Bhubaneswar together accounted for nearly half of the total transactions in key Tier-2 cities, at 5.3 million sq ft.
India’s retail footprint is also expanding beyond the major metros. The country had 134 million sq ft of organised shopping-centre stock across 32 cities and 365 shopping centres in 2025, of which 36 million sq ft was in 24 Tier-2 cities.
The selected next real estate markets of Bhopal, Bhubaneswar, Chandigarh Tricity, Coimbatore, Indore, Jaipur, Kochi, Lucknow, Nagpur and Visakhapatnam together accounted for approximately 60 per cent of the total Tier-2 shopping-centre stock.