GV Sanjay Reddy talks about what’s fuelling the real estate surge in Tier 2, Tier 3 India: The Shift to Smalle

For decades, real estate has served as the backbone of India's economic growth, shaping the nation's urban landscape and supporting millions of livelihoods. The sector has not only provided homes and workplaces but has also catalysed the development of infrastructure, retail, and civic amenities, fuelling aspirations and driving prosperity across the country.

However, with the relentless pace of development, India's top metropolitan cities have reached a saturation point - land availability is scarce, property prices are sky-high, and congestion has become a persistent challenge. As a result, the spotlight is now shifting toward tier 2 and tier 3 cities, which are emerging as the new frontiers for real estate growth in 2025, offering untapped opportunities and a more sustainable urban future.

GV Sanjay Reddy, Vice Chairman of GVK Group, highlights this pivotal transition, noting that as the metros become increasingly exhausted, the real estate sector's focus on smaller cities is set to unlock new avenues for inclusive growth, infrastructure development, and investment, ultimately reshaping India's economic landscape for the next decade. Let's take a look.

India's real estate sector is undergoing a significant transformation, with its market size projected to surge from $332.85 billion in 2025 to $985.80 billion by 2030, reflecting a CAGR of 24.25% and underscoring its central role in the nation's economic growth.

While the top metro cities have historically dominated both residential and commercial real estate, recent data shows a marked slowdown in housing sales across these metros, with a 12% year-on-year decline in Q1 2025 and a shift in buyer preference toward premium segments rather than affordable housing.

In contrast, tier 2 and 3 cities are rapidly emerging as pivotal growth hubs, now accounting for more than 40% of new housing developments by 2025. Cities like Jaipur, Indore, Kochi, and Chandigarh are witnessing property price increases of 10-15% in prime areas. According to JLL India and Housing.com, this shift signals a new era where the future of real estate growth in India lies beyond the exhausted metros, with tier 2 and 3 cities set to drive the next wave of expansion and innovation in 2025 and beyond.

"Who would've thought the day would come when 'quaint' beats 'quicker commute' and a home office with a view of the hills trumps a high-rise cubicle? As work-from-home culture takes root, people are trading city chaos for the charm of smaller towns - drawn by affordable homes, cleaner air, less traffic, a stronger sense of community, and the simple joy of having space to breathe. Turns out, the real luxury isn't a pin code, but peace of mind," says GV Sanjay Reddy.

But what is driving people to these smaller cities?

People are increasingly drawn to India's tier 2 and 3 cities due to a blend of economic, lifestyle, and technological factors. One of the primary drivers is the affordability of housing and overall cost of living, which is significantly lower than in metropolitan areas, allowing families to enjoy larger homes and better amenities within their budgets.

Additionally, improved infrastructure spurred by government initiatives like the Smart Cities Mission has enhanced connectivity, healthcare, education, and urban amenities, making these cities more livable and attractive for both residents and businesses.

The widespread adoption of remote and hybrid work models has further accelerated this trend, as professionals no longer need to live close to their offices and can instead opt for quieter, less congested towns without compromising their careers.

"Let's face it, who wouldn't trade honking horns and smog for fresh air, open roads, and a pace that doesn't feel like a sprint? Smaller cities are winning hearts - especially with families and retirees - because sometimes, the best luxury is just a little less chaos and a lot more breathing room," believes GV Sanjay Reddy.

Economic growth in these regions is also notable, with emerging startups, IT parks, and industrial hubs creating new employment opportunities and fostering local entrepreneurship. Moreover, digital transformation and increased internet penetration have empowered residents to access education, skill development, and business prospects, effectively bridging the urban-rural divide.

As India's real estate landscape evolves, the momentum building in tier 2 and 3 cities signals a transformative era for both the sector and the people who call these places home. Cities once considered peripheral are now at the heart of innovation, opportunity, and quality living - offering not just houses, but thriving communities and a renewed sense of possibility.

For those seeking growth, comfort, and a better tomorrow, the future of real estate in India's tier 2 and 3 cities shines brighter than ever.