Tier-2 cities see housing prices rise nearly twice as fast as top 8 markets: Report

Residential prices across 11 emerging Tier-2 markets have grown nearly twice as fast as those in India’s top eight cities over the past decade, highlighting the growing role of smaller cities in the next phase of India’s real estate expansion, according to a CII-Knight Frank India report released on Friday.The report, titled India’s Next Real Estate Markets, identified Bhopal, Bhubaneswar, Chandigarh Tricity, Goa, Indore, Jaipur, Kochi, Lucknow, Nagpur, Visakhapatnam and Coimbatore as emerging markets with the potential to drive the next phase of real estate growth.These 11 cities recorded an average residential price compound annual growth rate (CAGR) of 8 per cent between 2016 and 2026, compared with 4 per cent across the top eight markets, Mumbai, Bengaluru, Delhi-NCR, Hyderabad, Chennai, Pune, Ahmedabad and Kolkata.Smaller cities widen price growth leadThe gap has become more pronounced in recent years. Residential prices across the 11 emerging markets rose 63 per cent between 2021 and 2026, compared with 42 per cent growth across the top eight cities, according to the report.The average residential prices in the 11 emerging markets range from Rs 4,500 per sq ft to Rs 13,500 per sq ft.The report attributed the faster price growth to strengthening economic fundamentals, supported by infrastructure development, better connectivity and rising consumption.“India’s real estate growth is increasingly broadening beyond the traditional metropolitan centres,” Knight Frank India chairman and managing director Shishir Baijal said.Baijal said the investable opportunity in Tier-2 and Tier-3 cities, satellite markets and emerging corridors would depend not only on infrastructure creation but also on their ability to convert connectivity into sustained economic activity.He said cities that bring together employment, enterprise, population growth, consumption and urban capacity would be better placed to build deeper and more diversified real estate markets.Infrastructure, commercial activity support growthInfrastructure spending could provide further support to the expansion of smaller-city real estate markets.The share of infrastructure expenditure in total government capital expenditure increased to 55 per cent in FY26 from 39 per cent in FY15, the report said.The government’s three-year public-private partnership pipeline comprises 852 projects with a combined cost of Rs 17 lakh crore, according to the report.Commercial activity has also been expanding across smaller markets. Key Tier-2 cities recorded 11.2 million sq ft of warehousing lease transactions in 2025, with six of the identified emerging markets accounting for 5.3 million sq ft.Meanwhile, 24 Tier-2 cities accounted for 36 million sq ft of India’s total 134 million sq ft organised shopping-centre stock in 2025.The report estimated that India’s real estate sector could reach $5.8 trillion by 2047, with Tier-2 and Tier-3 cities expected to contribute 25-30 per cent, equivalent to $1.4-1.7 trillion.It said realising this opportunity would depend on the availability of serviced land, efficient approvals, reliable utilities and infrastructure capable of generating employment and enterprise.Ready to Make a Smarter Property Decision? Build Your Legacy with TOI Homes.