India’s tier-2 housing markets are beginning to look a lot like tier-1 cities. Sales volumes are slowing, prices are rising, and affordable homes are becoming harder to find.
According to NSE-listed real estate data analytics firm PropEquity, housing sales value across the top 15 tier-2 cities remained flat at ₹1.48 lakh crore in 2025. But beneath that steady headline number lies a shift. Sales volumes fell 10% year-on-year to 1,56,181 units, down from 1,72,599 units in 2024.
The message is clear: homes are getting costlier, and fewer people are buying.
Affordable Housing Shrinks, Premium Homes Rise
The slowdown is closely linked to changing price dynamics. Homes priced below ₹1 crore, traditionally the backbone of tier-2 demand, saw a 15% year-on-year drop in sales volumes in 2025. Their market share slipped to 72%, down from 77% the previous year.
At the same time, homes priced above ₹1 crore recorded a 9% growth in sales. Their share increased to 28% from 23% in 2024.
In short, the market is shifting upward. Buyers are spending more, but the number of transactions is falling.
Samir Jasuja, Founder and CEO of PropEquity, explains that the slowdown over the past two years is largely due to shrinking supply in the sub-₹1 crore segment. Rising land and construction costs are pushing developers to launch projects in higher price brackets. Add to that changing buyer aspirations, and tier-2 cities are increasingly mirroring tier-1 markets where volumes soften even as prices climb.
Gujarat Leads, Visakhapatnam Sees Sharpest Fall
In absolute numbers, Gujarat dominated tier-2 housing activity. Ahmedabad, Gandhinagar, Vadodara, and Surat together accounted for 63% of total sales across the top 15 cities. Ahmedabad alone contributed 51,148 units, or 33% of total sales, despite an 8% drop from the previous year.
Surat saw a 15% decline in sales, Vadodara fell 19%, and Gandhinagar remained nearly flat with a marginal 1% dip.
Among the 15 cities, only Mohali and Lucknow bucked the trend. Mohali posted a strong 34% growth in sales volumes, while Lucknow saw a modest 6% increase.
At the other end of the spectrum, Visakhapatnam recorded the steepest decline, with sales plunging 38%. Bhubaneshwar also saw a significant 25% drop, while Nagpur and Kochi fell 18% and 17% respectively.
The broader pattern shows cooling demand across most tier-2 markets.
Ahmedabad Moves Toward Tier-1 Status
One standout development is Ahmedabad’s growing scale. Beginning 2026, the city may effectively be regarded as a tier-1 market. It has surpassed several established tier-1 cities in both housing launches and absorption.
With deep demand, consistent supply, and expanding infrastructure, Ahmedabad’s growth story reflects how certain tier-2 cities are evolving into large, self-sustaining urban centres.
New Supply Also Contracts
The slowdown is not limited to sales. New housing supply across the top 15 tier-2 cities declined 6% to 1,36,243 units in 2025, down from 1,45,139 units in 2024.
Supply in homes priced below ₹1 crore fell 5%, while launches in the above ₹1 crore category declined 8%.
Again, Gujarat led in activity. The four Gujarat cities accounted for 64% of total launches in 2025.
Mohali stood out with a dramatic 108% surge in new supply. Bhopal saw a 66% increase, while Ahmedabad and Jaipur recorded modest growth of 3% and 2% respectively.
However, most other cities witnessed contraction. Bhubaneshwar saw the steepest fall in new launches at 57%, followed by Visakhapatnam at 53% and Lucknow at 43%.
Infrastructure Push and Affordability Concerns
Government focus on tier-2 cities through improved connectivity, industrial corridors, and manufacturing hubs has driven price appreciation. As infrastructure improves, so do land values.
But this success comes with consequences. Average housing units in many tier-2 markets are now breaching the ₹1 crore mark. As prices rise, affordability weakens and absorption slows.
Jasuja cautions that this trend could become a broader concern. Affordability pressures are no longer limited to premium buyers. Even affordable and mid-income segments are feeling the strain.
A Market at a Turning Point
Tier-2 cities were once seen as India’s affordability engines, offering value-driven housing and strong volume growth. That model is now under pressure.
While overall sales value remains stable, the decline in volumes signals a structural shift. Rising costs, premiumisation, and changing buyer preferences are reshaping demand patterns.
The coming years will determine whether developers can recalibrate supply to revive volumes, or whether tier-2 cities will fully transition into higher-priced, slower-moving markets.
For now, the data suggests one thing: growth is no longer just about expansion. It is increasingly about balance between aspiration and affordability.
