Tier 2 Cities in India: Real Estate Growth in These Cities

Do you know that rapid urbanization in Tier 2 cities in India is taking the real estate sector in the country to new heights? The Confederation of Real Estate Developer’s Associations of India (CREDAI) and Cushman & Wakefield have jointly released a report in which they shared the list of 17 top-tier 2 cities in India that have the potential to boost India’s real estate market. The coronavirus pandemic somehow led to the migration trend to these cities, and this in turn impacted the real estate growth, leading to the overall growth of Tier 2 cities as viable alternatives for both residential and commercial purposes.

Let us acquaint you with the list of Tier 2 cities in India and the factors contributing to real estate growth in these cities.

What are Tier 2 Cities in India?

Based on three prime factors: population, infrastructure, and economic activities, cities in India are categorized into different tiers like 1, 2, 3, and 4. So, what are Tier 1 and Tier 2 cities? Tier 1 Cities are highly developed metropolitan cities such as Mumbai, Delhi, and Bangalore, whereas, cities like Jaipur, Ahmedabad, Lucknow, and Coimbatore are some of the Tier 2 cities that fall below Tier 1 cities but are more developed than Tier 3 cities like Baroda, Madurai, Aligarh, and so on. Tier 2 cities in India exhibit strong growth potential due to their affordability, better infrastructure, and government incentives for business development.

List of Tier 2 Cities in India

So, if you are now wondering how many Tier 2 cities are in India, let us enlighten you with the same. 97 cities are classified as Tier 2 cities in India by the government. The table below will show you the list of top Tier 2 cities in India:

Factors Driving Real Estate Growth in Tier 2 Cities

Why is the real estate sector booming in Tier-2 Cities? Let us understand these factors one by one:

1. Affordable Property Pricing: What makes Tier 2 cities even more popular than Tier 1 cities is comparatively affordable property pricing. Homebuyers, investors, and real estate agents are therefore investing more in such cities because they know these cities will soon be the hub for middle-class income families and young professionals who dream to own a property.
2. Better Infrastructure: Who doesn’t want to live in a city with developed infrastructure? Hence, the second most attractive feature of Tier-2 cities that is driving real estate growth is the rapid infrastructural development. Be it roads, airports, or public transport, all such infrastructural developments are contributing to the real estate growth in these cities.
3. Improved Quality of Life: Naturally, living in a place with improved infrastructure means enjoying an enhanced quality of life. There is also a better work-life balance with less congestion, less pollution, and cleaner air in these green Tier-2 cities, which makes them all the more attractive to families and professionals.
4. Cheaper Cost of Living: Another reason that can make anyone interested in living or working in the top tier 2 cities in India is the cheaper cost of living there. It has been found that the overall cost of living for facilities like housing, healthcare, education, and other daily expenses is lower in Tier 2 cities as compared to Tier 1 cities.
5. Rise of Co-Working Spaces and Commercial Real Estate: Thanks to the pandemic for bringing in the trend of remote work culture and hybrid office models that are contributing to high demand for co-working spaces and commercial real estate. ere This can particularly be seen in Tier 2 cities due to lower rental costs.
6. Higher Demand in the Rental Market: There has been a high demand in the rental market in the 2 Tier cities. The top reason for this is the increase in migration of students, working professionals, and business owners to these cities in search of jobs, better facilities, and affordable living. This growth is further enhanced due to the rise of educational institutions and manufacturing hubs in these emerging cities.
7. Government Incentives: On top of it all, there are appealing government initiatives through which first-time homebuyers are motivated to invest in these Tier 2 cities, like the Smart City projects and subsidies.

Top 5 Emerging Real Estate Hotspots in Tier 2 Cities

1. Chandigarh: Known as a city with a well-planned infrastructure, clean environment, and proximity to Delhi, Chandigarh is a Tier 2 city that has also turned into a prime real estate hotspot. The city’s growing IT sector and excellent connectivity make it an attractive destination for investors and homebuyers.
2. Indore: Ideally situated in Madhya Pradesh, Indoor is the commercial hub that is witnessing rapid real estate growth. Thanks to its smart city initiatives, thriving IT sector, and improved metro connectivity, Indore has become a rising rental market for many.
3. Ahmedabad: With a strong industrial base and expansion of metro rail projects, Ahmedabad is experiencing a real estate boom. The lower property prices and increased job opportunities make this as one of the top Tier 2 cities in India for investors.
4. Coimbatore: Rightly known as the “Manchester of South India”, Coimbatore, with its pleasant climate and expanding IT sector, has a high real estate demand. Housing in this city is affordable, and what comes as an added advantage is its well-developed infrastructure.
5. Lucknow: The well-known capital of Uttar Pradesh is experiencing a real estate hike due to its commercial hubs, improved connectivity, and smart city projects. Lucknow is winning the hearts of investors, especially from middle-class families and professionals, due to its infrastructure and rich heritage.

We assume reading this article, you are clear about the main difference between Tier 1 and Tier 2 cities. As urbanization spreads beyond metros, Tier 2 cities are set to become the future of India’s real estate market. Be it for the sake of affordability, better business opportunities, improved connectivity, and better infrastructure, Tier 2 cities in India are emerging as the new hotspots for real estate growth.

FAQs about Tier 2 Cities in India