Summary of this article
Tier-II cities attract aspirational homebuyers
Lifestyle-driven housing demand increases rapidly
Remote work boosts peripheral housing growth
The Indian residential real estate market is unfolding a major structural shift. This is mainly seen in the Tier-II cities. These cities were once considered to be driven by the affordability factor, but this is changing. These cities are now emerging as aspirational for buyers who are looking for a better lifestyle, larger homes, and premium amenities. Recent highlights from a Liases Foras report in a collaboration with CREDAI indicate that the momentum of these cities is no longer just confined to the metropolitan regions. The tier-II cities have significantly contributed to sales growth, supply expansion, and ever-changing consumer demand.
Tier-I cities have been the core of housing, employment, and growth for ages, which has driven 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.
This behaviour in Tier-II cities is a transition to aspiration-led buying. Earlier, homebuyers in cities like Lucknow, Indore, Coimbatore, Surat, and Jaipur were primarily focused on affordability and basic functionality. Now, the same buyers are gravitating towards prioritising lifestyle upgrades, branded developments, wellness amenities and integrated townships.
“What makes this shift fascinating is that it is not being driven only by the ultra-rich. It is increasingly being driven by ambitious middle-class professionals, entrepreneurs, startup founders, NRIs and business families who have grown up in Tier 2 India but now think globally. Social media, global travel, remote business ecosystems and digital exposure have completely changed consumption psychology,” adds Manoj Dhanotiya, Founder and CEO, Micro Mitti.
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. Investors look for larger homes, better amenities, and thoughtfully planned out townships, for which these cities have the land parcels.
“In Tier 1 cities, luxury has become financially exhausting. In many metro markets, buyers are paying enormous premiums for extremely compressed lifestyles, long commutes and declining personal time. Tier 2 cities, on the other hand, are offering something psychologically powerful: aspirational living without complete financial suffocation. That is why the middle class is stretching itself toward premium projects in emerging cities. Not because they suddenly became wealthier overnight, but because Tier 2 India still offers the possibility of upward lifestyle mobility,” adds Dhanotiya.
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.
Overall, the evolution of buyer preferences in these cities has marked a defining phase in India’s real estate journey. The modern homebuyer in these cities has moved towards informed, aspirational and quality-driven than ever before.
