Why Premium Buyers Are Choosing Tier 2 Over Tier 1

The Indian real estate landscape, along with buyer preferences, is changing the definition of the premium housing segment. Tier-I cities have been the core of housing, employment, and growth for ages, which drove in investments and dense projects from developers and builders. However, these cities are oversaturated now, even if they used to be symbols of aspiration and growth. Now, Tier-II cities are also seen as a reliable option for affluent homebuyers to invest in premium projects, as many of them are increasingly turning their attention to peripheral Tier-II cities. This shift symbolises a deeper reset of what luxury means in the Indian real estate markets.

The core of this shift is the changing definition of premium housing. For the affluent and premium buyer, premium housing is no longer just the high-rise apartments in the dense urban clusters. It is being redefined by the quality of life, space, and comfort. “The new buying preference has specially highlighted the premium property segment, wherein it is not about owning a house anymore, but about enjoying a higher standard of living. With the same vision, buyers are now inclined towards the slow life of smaller cities with enhanced luxury, design which is timeless and away from the fast-paced, big city life,” says Nikhil Madan, Managing Director, Mahima Group. For many high-net-worth individuals, these factors tend to outweigh the advantages of living in metro cities.

Economic considerations play a critical role in the changes in buyer preferences. Property prices in Tier-I cities have skyrocketed, where mid-segment buyers barely have a unit of their own, and the affordable segment is also something far-fetched. Previous Knight Frank data indicates that 50 per cent of the housing sales were in the luxury segment. This reinforces how much in demand this segment is. “There is a significant rise in new residential launches of premium and luxury in tier 2 cities such as Jaipur, Lucknow, Mohali, and Chandigarh, to name a few. This reflects confidence in end-user demand due to steady growth and increased avenues of wealth creation in these parts of the country,” adds Madan. Investors look for larger homes, better amenities, and thoughtfully planned out townships, for which these cities have the land parcels.

Another factor contributing to the growth of this segment in Tier-II cities is the flexible work model. The widespread adoption of remote and hybrid work has delinked the employment factor from the main cities. Professionals are no longer required to be in close proximity to the corporate hub; this allows them to opt for permanent residences in cities that are fast-growing and provides them with mental peace. Life in Tier-I cities has displayed challenges for many, such as high property prices, pollution, lack of infrastructure, and dense population as well. These things are not present in Tier-II and Tier-III cities as of yet. “The definition of luxury real estate in India will no longer revolve around density but on desirability, and increasingly, the desirability of such real estate will lie where life is less hectic and more significant,” states Madan.

Moving forward, this trend is likely to gain momentum, as the infrastructural developments keep on improving and economic flexibility and opportunities expand to the Tier-II and Tier-III cities.