Housing markets across India’s leading Tier 2 cities showed clear signs of cooling in the July to September quarter of 2025, with home sales slipping even as the value of transactions continued to rise. The trend reflects a market that is slowly shifting gears from volume-driven growth to value-led demand.
According to a report by PropEquity, housing sales across the top 15 Tier 2 cities declined 4 percent year-on-year to 39,201 units in Q3 2025. However, the total value of these transactions increased 4 percent to Rs 37,409 crore, indicating that buyers are increasingly opting for higher-priced homes.
New housing supply also softened. Fresh launches dropped 10 percent year-on-year to 28,721 units during the quarter, as developers adopted a cautious approach amid moderating demand and rising construction costs.
Eight of the fifteen tracked cities recorded a fall in sales volumes. Bhubaneswar saw the steepest decline at 26 percent, highlighting a sharp slowdown in buyer activity in the eastern market. In contrast, Trivandrum posted the strongest growth, with sales rising 19 percent year-on-year, driven by steady end-user demand and improving infrastructure.
The pattern was similar on the supply side. Bhubaneswar again stood out with the largest drop in new launches, down a sharp 88 percent in the quarter. Overall, eight cities reported a decline in fresh supply.
In absolute numbers, Ahmedabad remained the largest Tier 2 housing market during the quarter, leading both in sales and new launches. The city continued to benefit from strong industrial growth, infrastructure expansion, and sustained developer interest.
On a sequential basis, the market also showed signs of softening. Housing sales fell 3 percent quarter-on-quarter, while the total value of transactions dipped 1 percent. New launches dropped sharply by 26 percent over the previous quarter, pointing to growing supply restraint by developers.
Commenting on the trend, Samir Jasuja, Founder and CEO of PropEquity, said the slowdown is largely concentrated in the affordable and mid-income housing segments. Rising input costs, higher land prices, and changing consumer preferences are gradually pushing home prices and unit sizes upward. As a result, sales momentum in price-sensitive segments has started to moderate.
He added that despite the short-term moderation, Tier 2 cities remain a key pillar of India’s real estate growth story. Expanding employment opportunities, improving connectivity, and sustained investment in infrastructure continue to support long-term residential demand across these markets.
Region-wise data shows a mixed picture. Western India, which includes Ahmedabad, Surat, Gandhinagar, Vadodara, Nashik, Nagpur, and Goa, recorded a 6 percent year-on-year decline and a 4 percent quarter-on-quarter decline in housing sales during Q3 2025. The western region continued to dominate activity, accounting for 76 percent of total sales across the top 15 Tier 2 cities.
Northern India, comprising Lucknow, Mohali, and Jaipur, bucked the broader trend. The region recorded a strong 16 percent year-on-year rise in sales and a 7 percent sequential increase during the quarter, supported by steady end-user demand and growing interest from investors.
Southern India, which includes Coimbatore, Trivandrum, and Kochi, saw a 7 percent year-on-year decline in sales but a marginal 3 percent quarter-on-quarter increase. The region’s market appears stable but cautious, with buyers focusing on ready-to-move-in properties and established developers.
Central and Eastern India, represented by Bhopal and Bhubaneswar, witnessed a sharper slowdown. Sales in this region fell 14 percent year-on-year and 13 percent quarter-on-quarter, reflecting weaker buyer sentiment and limited new project launches.
The supply picture followed a similar regional trend. Western India saw a 6 percent year-on-year and 18 percent quarter-on-quarter fall in new launches and accounted for 78 percent of total launches across all Tier 2 cities. Northern India recorded a sharper 27 percent year-on-year and 57 percent quarter-on-quarter decline in new project additions.
Southern India reported an 8 percent annual drop and a 19 percent quarterly decline in launches. Central and Eastern India also saw reduced supply, with launches falling 17 percent year-on-year and 26 percent quarter-on-quarter.
Industry experts believe the growing gap between stable demand and shrinking supply could support prices in the coming quarters, especially in well-connected micro-markets. However, the slowdown in affordable housing launches could deepen the demand-supply mismatch for first-time homebuyers.
For now, Tier 2 cities appear to be entering a phase of consolidation, where demand is becoming more selective, developers are carefully managing risk, and price growth is being driven more by product quality and location than by volume alone.
