India’s Next Wave Of Urban Growth Is Gradually Shifting Towards High-Potential Tier II Cities

India’s urban growth is no longer confined to metro markets. A second layer of cities is showing the kind of demand developers look for: rising incomes, improving connectivity, employment creation and buyers moving up the housing ladder.

CRISIL Intelligence estimates residential real estate demand across 10 Tier II cities grew at a 14 per cent CAGR between FY2021 and FY2026. Nagpur, Lucknow and Coimbatore recorded around 20 per cent growth. Home-loan disbursements grew over 15 per cent between 2020 and 2025, led by Indore, Nagpur and Jaipur.

Mohit Goel, Managing Director, Omaxe Group, says, “Tier II cities are at different stages of urban development, but underlying demand is becoming broader across markets such as Lucknow, Chandigarh, Ludhiana, Prayagraj and Vrindavan. Infrastructure is improving connectivity, while rising incomes and changing consumer preferences are creating demand for better planned residential and mixed-use developments. Buyers are looking beyond location and price. They are evaluating amenities, social infrastructure, long-term connectivity and the overall quality of development before making a decision.”

Prayagraj offers another model. The 594-km Ganga Expressway connecting Meerut with Prayagraj was inaugurated in April 2026, strengthening connectivity. Vrindavan has a different demand engine, with religious tourism, hospitality and second-home demand intersecting with connectivity.

“Markets such as Vrindavan demonstrate that Tier II growth does not follow a single template. Religious tourism, hospitality, wellness, second homes and residential demand are beginning to overlap, creating a different real estate opportunity from a conventional employment-led city. More broadly, investors are becoming interested in smaller markets when there is a combination of improving connectivity, expanding economic activity and a clear end-user base. The growing emphasis on wellness and lifestyle-led living is also adding a new dimension to these markets. This combination gives developers greater confidence to plan for long-term demand,” says Yamini Agarwal, Director, Nimbus Group.

Infrastructure is reinforcing the shift. Colliers’ assessment of 30 emerging cities last year placed Nagpur, Jaipur and Lucknow at the top, while identifying Chandigarh among the leading markets. The Samruddhi Mahamarg has strengthened Nagpur’s connectivity, while development is spreading along corridors in Lucknow and Jaipur.

“The changing profile of markets such as Lucknow is evident in the way demand is spreading across multiple corridors, supported by infrastructure, education and employment. This is creating a wider residential demand base, including local buyers as well as professionals and families returning to the city. The opportunity is for organised development that offers better planning, product quality and amenities rather than simply competing on affordability in the market today,” says Preksha Singh, CEO, Agrasheel Infra.

The opportunity is extending into commercial and retail real estate. A recent JLL assessment identified Chandigarh Tricity, Jaipur, Lucknow, Indore and Nagpur among nine emerging cities. Together, these account for around 70 million sq. ft. of Grade A office space and 80 million sq. ft. of logistics infrastructure.

These markets are moving beyond affordability-led demand.

“Panipat reflects how Tier II markets are developing their own demand drivers. Its industrial base, established connectivity and expanding residential demand are creating a stronger case for planned projects. Buyers are increasingly looking for bigger spaces, better planning, infrastructure and long-term value rather than affordability alone. As the market matures, the opportunity will be for projects that respond to end-user needs while creating a more organised residential environment for local and emerging buyers seeking durable long-term value,” says Rakesh Kaul, CEO & Managing Director, Ralith Realty.

CRISIL has also flagged rising prices and affordability pressure in some Tier II markets. The next phase, therefore, is likely to be less about indiscriminate expansion and more about selecting the right corridor, product and price point. India’s next urban markets are not waiting to become metros; they are developing their own reasons to matter.