India’s next phase of real estate expansion is increasingly moving beyond its largest metropolitan markets. Residential prices across 11 emerging Tier-2 markets rose 63% between 2021 and 2026, compared with 42% across the country’s eight largest cities, according to a CII-Knight Frank India report released on September 18. The shift points to a wider geographical spread of housing demand, but also raises questions about whether smaller cities can build the infrastructure and jobs needed to sustain it.Â
The markets covered include Bhopal, Bhubaneswar, Chandigarh Tricity, Goa, Indore, Jaipur, Kochi, Lucknow, Nagpur, Visakhapatnam and Coimbatore. Together, they recorded an average residential price CAGR of 8% between 2016 and 2026, twice the 4% recorded across the top eight cities. The numbers indicate a change in the economic geography of housing. Infrastructure upgrades and better connectivity are supporting demand, but the report also identifies stronger services activity, MSMEs, talent availability and the spread of global capability centres as important drivers. These factors can create demand for housing because employment and business activity are developing alongside urban expansion. The commercial picture is also widening. Key Tier-2 markets recorded 11.2 million sq ft of warehouse leasing in 2025, broadly close to the 11.4 million sq ft recorded in 2024. Lucknow, Jaipur, Nagpur, Indore, Coimbatore and Bhubaneswar together accounted for about 5.3 million sq ft of that activity. The figures suggest that logistics and consumption are becoming more important components of emerging urban economies.
Retail is following a similar pattern. India had 134 million sq ft of organised shopping-centre stock across 32 cities in 2025. Tier-2 cities accounted for 36 million sq ft across 24 markets. The selected emerging markets covered by the report represented about 60% of Tier-2 shopping-centre stock. This expansion, however, cannot be measured through property prices alone. The report estimates that India’s real estate sector could reach $5.8 trillion by 2047, with Tier-2 and Tier-3 cities potentially accounting for 25% to 30%, or $1.4 trillion to $1.7 trillion. Achieving that scale would require serviced land, reliable utilities, efficient approvals and infrastructure capable of supporting employment and enterprise. Public investment is already supporting this transition. Infrastructure spending as a share of government capital expenditure increased from 39% in FY2015 to 55% in FY2026. The government’s three-year PPP pipeline also contains 852 projects with an estimated value of ₹17 lakh crore, according to the report.
For India Tier Two Cities, the challenge now is to convert property-led growth into durable urban economies. Housing, employment, public transport, water, sanitation and climate resilience will need to expand together. Without that balance, rising property values could outpace the civic capacity required to support the people and businesses driving the next wave of urbanisation.
