Real Estate Boom : Why Tier-2 Cities Are Attracting Big Investors

With data showing strong housing demand, logistics growth and GCC jobs in smaller centres, could the tier-2 cities real estate boom be the real story you are missing in your portfolio?

Over the next decade, real estate is expected to triple in size. A study estimates that the Indian real estate sector could reach around USD 1.5 trillion by 2034, contributing about 10.5% of India’s GDP, up from an estimated USD 482 billion in 2024. That is a shift from being “one important sector” to becoming one of the core engines of economic output.

The same report expects the urban residential segment alone to account for over USD 900 billion by 2034, supported by a need for roughly 78 million homes in Indian cities over the next decade. 

At the same time, the sector has already come through a full cycle: a slowdown, a COVID shock, then a strong recovery. Today’s momentum is based on healthier balance sheets, stricter regulation and end-user demand, not just easy credit or speculative flipping. 

This is where Tier-2 cities come in. They are where a growing share of sales, price appreciation, jobs and infrastructure spending is showing up. To understand the tier-2 cities real estate boom and why large investors are paying attention, it helps to first look at how the overall market has behaved. 

The boom in numbers: What 2024–25 did to the market

Even with higher home loan rates and a jump in prices, housing demand stayed strong in 2024.

Research shows that the top 7 cities sold about 4.59 lakh homes in 2024. That is only a 4% dip vs 2023, but still roughly 76% higher than 2019 levels, the last pre-COVID year. In other words, volumes have cooled slightly from the peak, but the new baseline is much higher than before the pandemic.

Launches have become more disciplined as well. New supply in these cities fell around 7% YoY to about 4.12 lakh units in 2024, suggesting that developers are focusing on selling what they build instead of flooding the market. This helps keep inventory in check and reduces the risk of long, unfinished projects.

On the price side, the story is even clearer. A study reports that average housing prices across the top eight markets rose 11% YoY in Q3 2024, to around ₹11k per sq ft. All major cities saw annual price increases, with some markets such as Delhi NCR and Bengaluru recording gains of >20% in that period.

Put simply:

• Volumes are off the peak, but still well above pre-COVID levels.
• Prices have risen steadily for nearly four years in a row.
• New launches are more measured, which supports price stability.

This combination tells you that the boom is a more mature upcycle, driven by end-users upgrading to better homes and by investors looking for stable, long-term assets. It also tells you something else: as prices and land costs climb in core metro locations, both homebuyers and developers start looking for the next ring of growth.

That “next ring” is increasingly Tier-2 India.

Tier-2 cities real estate boom

For a long time, Tier-2 locations were seen as slower, safer and mostly for end-users. The recent data tells a different story.

An analysis of 30 Tier-2 cities shows Jaipur recorded the sharpest rise in launch prices, up 65% between 2023 and Oct’24. Prices moved from about ₹4,240 to ₹6,979 per sq ft in just one year. Guntur, Mangaluru and several others also saw double-digit gains in new-launch prices over the same period.

With numbers like these, Tier-2 cities are naturally drawing more investor attention. Here is what is driving that shift.

Jobs, GCCs and offices: Demand that sticks

India is now home to almost 3k Global Capability Centres (GCCs). These centres employ about 1.9 million professionals and increasingly handle high-value work, from engineering to analytics. GCCs in smaller cities have grown their share from around 5% of the total in FY2019 to about 7% in FY2024, with over 220 GCCs operating in Tier-2 and Tier-3 locations, employing roughly 82,000 people. 

Cities such as Coimbatore, Kochi and Thiruvananthapuram are singled out as leading southern hubs, each with 20–25 centres already active. 

On the hiring side, an insight describes a clear “Tier-2 surge”, with hiring in smaller cities growing at around 1.5 times the metro rate. The report links this to infrastructure projects, new manufacturing hubs and IT back-office expansion, and notes that even senior roles are spreading out beyond Tier-1 locations. 

Therefore, job growth in smaller cities is outpacing the big metros. Office demand in these markets is more likely to be sticky, backed by long-term corporate commitments.

For real estate investors, that is a stronger base for both rental income and capital appreciation in office and mixed-use assets.

Warehousing, logistics and data centres are following

The Tier-2 shift is not limited to homes and white-collar offices. Logistics is moving inland as well.

Reports show that industrial and warehousing leasing across the top eight cities reached a record 27.1 million sq ft in the first half of 2025, a 63% year-on-year jump. E-commerce and third-party logistics companies together accounted for more than half of this space.

The same report notes that occupiers are expanding networks into Tier-2 locations as they look for hubs closer to consumption and new manufacturing clusters. Cities such as Jaipur, Lucknow, Chandigarh, Hosur & Vizag crop up repeatedly on emerging logistics corridors. 

As networks get denser, you see three property trends in smaller cities:

• Land near highways and ring roads gets repriced as warehousing and truck terminals move in.
• Peripheral industrial parks and logistics parks find strong anchor tenants.
• Data centre and edge infrastructure begin to follow, especially where power and fibre are reliable.

Policy and infrastructure

The Tier-2 story would be much weaker without sustained policy and infra support.

Over the past decade, the Smart Cities Mission has funded upgrades across more than 100 cities, many of them Tier-2. Towns such as Jaipur, Kochi, Coimbatore & Indore have used this push to improve roads, public transport, water supply and digital infrastructure. 

At the same time, programmes like Gati Shakti and the National Infrastructure Pipeline have focused on highways, freight corridors, industrial corridors and regional airports. The Delhi–Mumbai Industrial Corridor (DMIC), for example, passes through or near several Tier-2 investment hotspots. 

When you put this next to the price and sales data, cities with visible corridor or airport upgrades often show stronger housing price moves.

Why big investors like Tier-2

When you view this through an investor’s lens, Tier-2 markets offer a different mix of risk and return compared with the core metros.

1. More room for upside: Prices in several Tier-2 pockets are still catching up with the quality of jobs, infrastructure and housing on the ground. That leaves more room for selective outperformance than in fully priced prime micro-markets in large metros. 
2. Lower entry costs and ability to build scale: Land, construction and ticket sizes are usually lower than in Tier-1 cores. This allows developers, funds and family offices to assemble larger projects, townships or parks and influence how an entire corridor evolves, instead of buying small slices of a crowded market. 
3. Demand anchored in the real economy: Growth in employment, manufacturing, logistics & local services means demand comes from people who live & work in these cities, not from short-term investors. That supports stable occupancy and rents across housing, offices and warehousing. 
4. Portfolio diversification: Allocating part of a portfolio to Tier-2 cities spreads risk across different regions, industries and demand cycles. For larger investors, this helps reduce dependence on a handful of metro office and luxury housing markets and creates a more balanced, long-term exposure to India’s urban growth.

Conclusion

India’s real estate sector is on track to become a USD 1.5 trillion industry by 2034, contributing over 10% of GDP. That growth will not come from a handful of metro postcodes alone.

For big investors, it is about broadening the map, using data to identify cities where jobs, infrastructure and real estate are rising together. For individual investors, it is a nudge to look beyond familiar skylines and evaluate their home towns or regional hubs with the same rigour they would apply to Mumbai or Bengaluru.

The growth outlook for real estate in tier-2 Indian cities is real. The opportunity in Tier-2 India is as much about being selective as it is about being early.