Summary of this article
The trend does not mean that large metros are losing their importance. The top eight cities continue to account for a significant share of housing demand and real estate activity.
However, improving infrastructure, rising incomes and expanding employment opportunities are giving smaller cities a larger role in the next phase of the property cycle.
As infrastructure improves and economic activity deepens, these markets are creating the conditions for more formal and diversified real-estate ecosystems spanning residential, retail, commercial and logistics assets.
Residential property prices in a set of emerging tier-2 markets have grown faster than those in India’s largest cities, signalling a gradual shift in the country’s real estate growth story beyond the traditional metropolitan centres. According to a joint report by the Confederation of Indian Industry (CII) and Knight Frank India, 11 emerging markets – Bhopal, Bhubaneswar, Chandigarh Tricity, Goa, Indore, Jaipur, Kochi, Lucknow, Nagpur, Visakhapatnam and Coimbatore – recorded an average residential price compounded annualised growth rate (CAGR) of 8 per cent between 2016 and 2026. This was twice the 4 per cent average growth recorded across India’s top eight cities.
The gap has become more visible in recent years. Between 2021 and 2026, residential prices across these 11 markets rose 63 per cent, compared with 42 per cent in the top eight cities.
The report, India’s Next Real Estate Markets, identifies these locations as potential growth markets based on factors, such as infrastructure, connectivity, economic activity, employment, enterprise, and consumption.
The trend does not mean that large metros are losing their importance. The top eight cities continue to account for a significant share of housing demand and real estate activity. However, improving infrastructure, rising incomes and expanding employment opportunities are giving smaller cities a larger role in the next phase of the property cycle.
Shishir Baijal, chairman and managing director, Knight Frank India, said, “India’s real estate growth is increasingly broadening beyond the traditional metropolitan centres.” He said the long-term potential of these markets would depend on whether better connectivity translates into sustained economic activity, employment, population growth, and consumption.
The expansion is visible beyond housing as well. In 2025, key tier-2 markets recorded 11.20 million sq. ft. of warehousing leasing, broadly similar to the 11.40 million sq. ft. recorded in 2024. Six of the identified markets – Lucknow, Jaipur, Nagpur, Indore, Coimbatore and Bhubaneswar – together accounted for 5.30 million sq. ft., or nearly half of the transactions across key tier-2 cities.
Retail is also spreading beyond the major metros. India had 134 million sq. ft. of organised shopping-centre stock across 32 cities and 365 centres in 2025. Tier-2 cities accounted for 36 million sq. ft. of this stock. Ten of the 11 markets identified in the report accounted for around 60 per cent of the tier-2 shopping-centre stock.
Infrastructure spending is expected to remain an important driver. The share of infrastructure expenditure in total government capital expenditure increased from 39 per cent in FY15 to 55 per cent in FY26. The government’s three-year public-private partnership (PPP) pipeline includes 852 projects with a combined estimated cost of Rs 17 lakh crore.
The broader demographic shift could further support these markets. Cities currently account for around 60 per cent of India’s gross domestic product (GDP) while housing about 40 per cent of its population. India’s urban population is projected to reach around 740 million by 2050. Meanwhile, the population of cities outside the top eight metros is expected to grow much faster, with the report projecting 28.20 per cent growth compared with 8.70 per cent for the top eight.
For real estate, the message is fairly clear: the next wave of demand may not come only from India’s biggest cities. As jobs, businesses, infrastructure and consumption spread to regional urban centres, smaller cities could increasingly become important markets for housing, retail, warehousing, and commercial property.
