Go Deep: Top Tier II & III Cities for Real Estate Investment and High Returns

New Delhi, April 29, 2025: Tier II and III cities in India are fast becoming the new epicenters of real estate growth, drawing attention from both aspiring homeowners and developers seeking untapped potential beyond overcrowded metros. Their growing allure lies in a powerful mix of affordability, infrastructure upgrades, and a noticeable shift toward modern urban living. As property prices soar in metropolitan areas, buyers are finding greater value in the spacious, budget-friendly homes that these rising cities have to offer—without compromising on quality or connectivity.

According to PropEquity, housing sales in India’s top 15 Tier II cities grew by 4 per cent to 1,78,771 units in 2024, while the sales value surged 20 per cent to Rs 1,52,552 crore. This marks a significant increase from 1,71,903 units and Rs 1,27,505 crore in 2023, reflecting a strong demand for residential real estate in smaller urban centres. In Northern India, comprising Jaipur, Mohali, and Lucknow, housing sales increased by 2.5 per cent to 18,889 units in 2024, while the sales value rose 23 per cent to Rs 19,127 crore.

This surge in real estate activity across Tier-II and Tier-III cities is being propelled by a combination of visionary government initiatives and shifting lifestyle preferences. Initiatives like the Smart Cities Mission, PM Gati Shakti, AMRUT, and HRIDAY are transforming urban infrastructure, enhancing connectivity, and preserving heritage, thereby laying the foundation for sustainable urban growth.

Simultaneously, the post-pandemic shift to hybrid work models has reduced the dependency on metros, with homebuyers now seeking larger, more affordable homes in smaller cities. Adding to this momentum is a wave of reverse migration, with young professionals returning to their roots, driven by aspirations for a better quality of life and a modern housing ecosystem.

Yash Miglani, Managing Director, Migsun Group, says, “The growth of India’s real estate sector is no longer limited to the metros. Tier II cities like Lucknow are experiencing a noticeable rise in demand fo luxury housing, driven by improved infrastructure, higher disposable incomes, and a new generation of aspirational buyers. At Migsun, we’re tapping into this momentum by planning premium projects that offer smart living, modern amenities, and a sense of community. We see immense potential in these emerging markets, where discerning buyers are looking for exclusivity and a high lifestyle quotient—without the inflated costs of big-city living.”

Manit Sethi, Director, Excentia Infra, says, “Dehradun has always attracted those seeking quality of life; and now, it’s equally appealing for high-return investments. The fresh air, scenic beauty, and balanced pace of life make it an attractive choice for families, retirees, and professionals. Particularly, we’ve seen a significant rise in interest from millennials working remotely and NRIs looking to settle in their hometowns without compromising on luxury or amenities. Hence, as the demand for luxury rises in nonmetro cities, we foresee crafting premium properties that are not just lavish homes but also offer high ROIs.”

Moreover, over the years, Tier II and Tier III cities have increasingly outperformed metros in terms of return on investment, especially in emerging micro-markets with infrastructure tailwinds. While property prices in major metros have plateaued, smaller cities are witnessing steady appreciation, offering investors higher capital gains. Rental yields, particularly in commercial spaces and co-living setups near educational and IT hubs, have also seen a noticeable uptick. With lower entry barriers and rising end-user demand, these cities present a compelling blend of affordability and long-term growth, making them ideal destinations for both seasoned and first-time real estate investors.

Neeraj Sharma, Managing Director, Escon Infra Realtors, says, “Among various Tier II and III cities, Lucknow is fast becoming a promising real estate location. With major infrastructure projects like the Kanpur-Lucknow Expressway, Purvanchal Expressway, and Ganga Expressway drastically improving connectivity and emerging micro-markets like Gomti Nagar Extension and Shaheed Path witnessing a surge in demand, the city offers an exceptional blend of affordability and future-ready development. As policy support and investor interest grow, we believe Lucknow is set to deliver high returns and redefine urban living in Tier II India.”

Piyush Kansal, Executive Director, Royale Estate, says, “Tier II and Tier III cities are experiencing a dynamic urban transformation, fueled by proactive government policies and growing private investment in infrastructure. In cities like Chandigarh, the urban fabric is incredibly well-planned, and that planning is extending into new developments across the tri-city region. With an increasing demand for lifestyle-led housing, investors see long-term value here. Hence, these advancements are not only strengthening local economies but also enhancing accessibility and livability, paving the way for sustained growth in the real estate sector in the region.”

Thus, with strong policy support, a youthful and dynamic population, and an increasingly aspirational mindset, Tier II and Tier III cities have transitioned from emerging to thriving real estate markets. For investors and developers, the window to capitalize on this growth is wide open. Those who enter these markets early stand to ride the next big wave of India’s real estate boom, securing long-term gains as these cities continue to develop and mature.