Luxury Realty Growth Moves Beyond Metros As Infra Push Lifts Smaller Cities

India’s property boom no longer remains a metro-only story. A growing share of activity is now shifting to Tier 2 and Tier 3 cities, where developers, investors and even homebuyers are recalibrating their focus. From cities like Lucknow and Indore to pilgrimage-driven markets such as Shirdi and Ayodhya, demand is being shaped as much by new infrastructure as by rising local aspirations. If the current pace of development and connectivity holds, smaller cities could well anchor the next phase of India’s real estate growth over the coming five years.

As per Square Yards’ recent report, land prices in Tier-2 and Tier-3 cities could increase by 25 per cent to 100 per cent over the next 2–4 years. What is driving this momentum is not a single trigger, but a convergence of shifts playing out simultaneously across these cities. Infrastructure is clearly leading the charge. The report says that the government infrastructure push, including the proposed City Economic Regions (CERs) with Rs 5,000 crore investment per region, is expected to accelerate regional development. Metro corridors significantly influence property values, with homes near metro lines commanding 8 per cent to 25 per cent premium and 15 per cent to 40 per cent appreciation after project completion.

Mohit Goel, Managing Director, Omaxe Group, says, “Tier II and III cities, as well as temple tourism corridors, are signalling that India’s next phase of real estate growth will increasingly be driven beyond the metros. Large-scale spending on expressways, rail links, city transport, and pilgrimage routes is beginning to ripple through local economies. Land prices are firming up, tourism is picking pace, and demand for housing from actual users is steadily rising. Cities like Lucknow and Prayagraj offer a clear example of this shift, driven by continued public investment in both core infrastructure and social amenities. At the same time, temple towns like Ayodhya and Mathura-Vrindavan are evolving from seasonal pilgrimage centres into year-round economic ecosystems, where hospitality, retail, second homes, and integrated townships are gaining traction.”

Omaxe identified the long-term potential of these markets well ahead of the curve and invested in building organised residential and commercial ecosystems when institutional capital was still metro-focused. That early entry has translated into a first-mover advantage as infrastructure catch-up is now unlocking value across these land banks.

He further adds, “What we are seeing today is not speculative demand but structurally driven end-user and investor interest. The Budget’s push will further accelerate planned urbanisation across these cities, reinforcing their position as the next high-growth real estate destinations.”

Recently, Delhi-based Assotech Realty has announced a strategic collaboration with Atmosphere Core, a rapidly-expanding international hospitality company with nine private island resorts in the Maldives. Under the partnership, Atmosphere Core will operate and manage Assotech’s upcoming first-of-its-kind, all-suite property in Shirdi, Maharashtra. The partnership reflects a broader shift underway in temple towns, many of which are evolving into more organised tourism hubs. Better infrastructure, improved connectivity, and the entry of professionally managed hospitality are gradually reshaping these destinations.

Neeraj Gulati, MD, Assotech Realty, says, “Pilgrimage tourism in India has grown sharply in recent years, which is increasingly visible in real estate demand around key spiritual centres. As per Ministry of Tourism data cited by IBEF, religious travel in India touched 1.43 billion visits in 2022, showing the sheer scale of the segment. Infrastructure development, improved connectivity and rising domestic tourism are collectively shaping the town into a well-rounded travel destination. We believe that spiritual destinations deserve thoughtfully-designed hospitality experiences that respect their cultural essence while meeting modern traveller expectations.”

Infrastructure projects like airports and expressways can drive 30 per cent to 70 per cent land value growth in surrounding areas. Industrial corridors and logistics hubs are also likely to create employment centres, leading to 20 per cent to 60 per cent land price appreciation over time. Emerging cities such as Bhubaneswar, Cuttack, Erode, Puri, Varanasi and Visakhapatnam are expected to lead the next real estate growth cycle in India.

B K Malagi, Vice Chairman, Experion Developers, says, “What stands out in Tier II and III cities today is the shift from episodic demand to ecosystem-driven growth. Better connectivity, stronger civic infrastructure, and policy push - particularly after Budget 2026 - have made these markets more transparent and easier to invest in. In Amritsar, buyer preferences are clearly evolving. Upgraded infrastructure and improved access are drawing not only local buyers but also NRIs with deep emotional and financial links to the city. This combination of heritage appeal, infrastructure-led growth, and a changing buyer mindset is likely to make Amritsar a prominent Tier-2 real estate market over the next five years.”

Alongside this, economic activity is becoming more decentralised, with companies setting up operations beyond metros, local entrepreneurship gaining ground, and government-backed hubs creating fresh demand cycles. Equally significant is the affordability advantage. For many buyers, especially first-generation wealth creators, these markets offer the ability to upgrade to larger, amenity-rich homes, which developers are increasingly positioning as accessible or “affordable luxury”, something that remains out of reach in most metro cities.

According to a report by Colliers-CII, India’s real estate sector is gearing up for a once-in-a-generation transformation, with market size projected to expand nearly 20X over the next two decades - from around USD 300 billion currently to USD 5–10 trillion by 2047. At the same time, rental yields in many of these cities are holding up better, especially in pockets seeing commercial or tourism-led activity. There’s also a clear early-mover advantage at play; investors who come in at this stage are essentially riding the first wave of organised growth.

Goldi Arora, Co-founder & Managing Director of Property Master, says, “Tier 2 and Tier 3 cities today offer a compelling mix of affordability, growth potential, and evolving demand patterns. Investors today are not just chasing low prices, they are evaluating infrastructure timelines apart from developer credibility, and long-term livability. The opportunity is huge, especially in early-stage markets, but it needs to be approached with a balanced lens. If supported by timely infrastructure delivery and stable macroeconomic conditions, these cities could very well outperform metros in terms of percentage growth over the next five years.”

Thus, the trajectory for these cities points towards a more fundamental transformation in how real estate is being planned and experienced. If the current pace of infrastructure and economic expansion continues, these cities are likely to evolve into far more mature, self-sustained real estate ecosystems over the next five years.