The residential property prices in 11 selected Tier-2 and Tier-3 cities across India are expected to have appreciated by 63% between 2021 and 2026, and are increasingly moving beyond the main metropolitan areas. This is above the 42% growth seen across India in its eight largest cities during 2021-26, per Confederation of Indian Industry (CII) and Knight Frank India.
The report alludes to the increased participation from new cities in India's real estate space, driven by infrastructure build-up, deeper employment pools, broadening services activity, MSMEs availability of talent, and proliferation of GCCs (global capability centres).
A few of the cities used in the report are Bhopal Bhubaneswar, The Chandigarh Tricity Goa Indore, Jaipur Kochi Lucknow Nagpur Visakhapatnam and Coimbatore.
Residential Prices Show Higher Growth in Emerging Cities
The prices of residential property across 11 cities averaged out to a CAGR of 8% from 2016 to 2026. This was much higher relative to India's 8 major citiesCAGR of 4% over the same period.
These findings show that the emerging cities are establishing deeper real estate markets- the real estate is responding to greater economic activity outside the core growing metropolitan centres.
According to the report, the reasons for this growth are the presence of MSMEs, availability of high quality talent, strengthening of services base in a number of cities, and the expansion of GCC operations into new cities.
Although the largest urban agglomerations represent the dominant proportion of India real estate activity, significant to the future of growth are the Tier-2 and Tier-3 cities.
Tier-2 and Tier-3 Cities All Could Contribute up to 30% of the Total Real Estate Production
The report expects the country's output of its real estate sector to hit USD 5.8 trillion by the year 2047. Tier-2 and Tier-3 cities may make up about 25 percent to 30 percent of its output, contributing roughly between USD 1.4 trillion to USD 1.7 trillion.
The report stated that turning this potential into long term economic activity will take more than just physical infrastructure. Developing countries will require, among other things, jobs-creating infrastructure, business activity, commercial real estate supply, serviced land, efficient approval processes, utilities and upgraded urban infrastructure.
The result is that infrastructure and urban planning are also at the heart of real estate's next stage of expansion in non-metro markets.
Infrastructure Spending Supports Private Investment
A significant rise in government infrastructure investment also happened in the last decade. Infrastructure investment as share of aggregate government capital investment was 39% in FY15 and increased to 55% in FY26.
The increased allocations to infrastructure have created the backbone for private sector investment, as well as for PPPs.
As per the report, the government has 852 projects in its three years PPP pipeline with a total estimated cost of Rs 17 lakh crore. Several of these projects are anticipated to have a far-reaching effect on economic activity and real estate development in emerging markets.
Enhanced connectivity, transport infrastructure and urban services can facilitate the clustering of residential commercial warehousing and retail development around an expanding base of economic centres.
Emerging Cities Gain Importance for Investors and Developers
Knight Frank India International Partner, Chairman and Managing Director Shishir Baijal said that real estate growth is increasingly spreading beyond traditional metropolitan centres.
He said the investment opportunity in Tier-2 and Tier-3 cities, satellite markets and emerging corridors would depend not only on infrastructure creation but also on the ability of these locations to convert improved connectivity into sustained economic activity.
Mr. Baijal also highlighted employment, enterprise creation, population growth, consumption and urban capacity as factors that can influence the development of more diversified real estate markets.
For developers and investors, the expansion of the market base creates opportunities across a wider set of cities. However, the report also indicates that market-level economic conditions will remain important when assessing individual locations.
Warehousing Activity Remains Significant
Another signal for emerging cities is the growth in the industrial and logistics real estate.
Top Tier-2 markets saw a total of 11.2m sq ft of warehousing lease transactions completed in 2025, not much different from 11.4m sq ft of such transactions completed in 2024.
From the six markets chosen for the next real estate Lucknow Jaipur Nagpur Indore, Coimbatore and Bhubaneswar together comprising close to 50 per cent of warehousing transactions in the major Tier-2 cities.
All of the six cities were responsible for nearly 5.3 million sq ft of the transactions in the year 2025.
This activity demonstrates the increasing significance of new urban centres to logistics and consumption driven real estate, driven by the growth of e-commerce, organized retail and regional manufacturing.
Industry Expert Opinions
Mr. Rahul Singla, Director, MAPSKO Group, said, "The sharp 63% rise in housing prices across emerging real estate markets reflects a fundamental shift in homebuyer preferences and the growing appeal of well-connected growth corridors beyond established metropolitan centres. Infrastructure upgrades, improved connectivity, expanding employment hubs, and lifestyle-driven developments are accelerating demand in these locations. As cities grow, emerging markets are becoming self-sustaining ecosystems that offer quality living and long-term value appreciation. For developers, this trend underscores the importance of creating future-ready communities that combine modern amenities, accessibility, and sustainable planning to meet the aspirations of a new generation of homebuyers. "
Mr. Yashank Wason, MD, Royal Green Realty said, "The CII–Knight Frank numbers confirm a shift we have been building for. Sonipat and Bahadurgarh sit right in the National Capital Region's expansion path, and Indore has shown consistent end-user demand for years now. A 63% price rise across emerging markets against 42% in the top eight cities tells you buyers and investors are recalibrating where value actually lies. What matters more to us is the report's point that infrastructure alone does not sustain a market. Jobs, retail and population growth have to follow, and that is exactly the pattern we see across our project locations, where connectivity is now translating into real, sustained housing demand."
Retail Footprint Expands Beyond Major Metros
Retail development is also an area where the more developed cities of the Tier-2 ranges are beginning to share more of the energy.
In 2025, India had 134 million sq ft of organised shopping-centre stock spread over 32 citiesand 365 shopping centres. Established cities accounted for approximately 98 million sq ft of this stock and the remaining 36 million sq ft was spread over 24 Tier-2 cities.
The Tier-2 shopping-centres stocks in the markets Bhopal Bhubaneswar Chandigarh Tricity Coimbatore Indore, Jaipur Kochi Lucknow, Nagpur and Visakhapatnam-constituted 60% of the entire stock.
The growth of organised retail is also a consequence of the consumption base expansion in these markets coupled with the increasing urbanisation and infrastructure developments.
Economic Activity Will Shape Future Real Estate Growth
The report indicates that the next wave of India's real estate expansion will be in a much larger number of markets than just the big cities across the country.
Residential price appreciation, warehousing deals and organized retail construction suggest many of the Tier-2 and Tier-3 centers are already experiencing up tick in activity levels.
Yet, the volumes and longevity of this growth will be contingent upon the capacity of cities to generate jobs, hold businesses, cater for the demands of expanded population settlements through supportive infrastructure and stable urban services to sustain the expansion. The contribution from which smaller cities would become an integral part of the incoming urban and economic development of the country, with India's real estate share envisaged to be USD 5.8 Trillion in output by 2047.
