Housing Supply In Tier 2 Cities Plummets 35% In Early 2025, Bhubaneswar, Thiruvananthapuram Lead

India's real estate pulse indicated weakening sentiment in its tier 2 cities, with new housing supply nosediving by 35 per cent in the first quarter of 2025, according to data from PropEquity. The report, released this week, showed new launches in the top 15 tier 2 cities dropped to 30,155 units, down from 45,901 in the same period last year.

The most dramatic fall came from Bhubaneswar, where supply shrank by 72 per cent, followed closely by Thiruvananthapuram (71 per cent) and Mangaluru (64 per cent). In contrast, Nashik recorded only a marginal decline of 2 per cent, signalling regional discrepancies in development pace and demand.

"This decline in supply is a result of a cautious approach and shifting priorities by developers," said Samir Jasuja, Founder and CEO of PropEquity. "Financially robust developers with strong balance sheets look to launch premium homes in order to increase their profit margin."

Eastern and Central India bore the brunt, with a staggering 68 per cent fall in new launches. Northern India witnessed a 55 per cent drop, while supply in Western and Southern India dipped by 28 per cent and 26 per cent, respectively.

Data on price segmentation provided a clear picture of how the market is shifting. Tier 2 housing, once dominated by homes under Rs 50 lakh, saw supply cut by more than half. This category accounted for just 24 per cent of the total supply in Q1 2025, down from 33 per cent the previous quarter.

Mid-priced homes between Rs 50 lakh and Rs 1 crore, while down 12 per cent in volume, dominated the market with nearly 48 per cent share. Meanwhile, homes in the Rs 1–2 crore bracket grew in share from 18 per cent to 23 per cent despite a 17 per cent decline in actual supply. High-end homes priced above Rs 2 crore nearly vanished, plunging 73 per cent year-on-year and now represent just 5 per cent of launches.

State capitals were hit hard, with launches of homes under Rs 50 lakh dropping by 90 per cent. However, there was a surprising 31 per cent rise in homes priced between the range of Rs 1 crore and Rs 2 crore, suggesting a tilt toward premium inventory even in government-heavy cities.

PropEquity's findings suggested developers are retreating from the lower-income segment, citing unsustainable margins. "Supply of homes under Rs 50 lakh has seen a consistent decline due to its unviability," Jasuja explained.

Still, the outlook was not entirely bleak. The recent 50-basis-point reduction in the Reserve Bank of India's repo rate is expected to ease home loan interest rates, currently around 8–8.5 per cent, potentially boosting demand in the Rs 50 lakh–Rs 2 crore range.

"There's still a massive opportunity in tier 2 cities," Jasuja noted. "Infrastructure development and government focus on these cities as growth drivers will continue to spur end-user demand."