Summary of this article
Tier-2 housing sales fall 10% YoY.
Premium homes gain share and demand.
Supply and affordable launches decline.
Despite several attempts to boost the tier 2 housing markets in India, the markets are showing an opposite structural shift. As per the latest Propequity data, housing sales across the top 15 tier II cities have fallen by a percentage of 10 per cent on a year-on-year basis in 2025. The launches in these cities also declined by a total of 6 per cent. The overall sales value remained at Rs 1.48 lakh crores in these cities; the numbers reveal a different angle.
In 2025, total housing absorption decreased to 156,181 units from a total of 172,599 units in 2024. Irrespective of the decline in volume, the sales value has remained unchanged. This illustrates how rising property prices are filling the gaps in slower demand. This divergent trend is a reflection of what is already happening in the Tier I metro markets. Few homes are being sold, but at higher prices. Only Mohali and Lucknow have been able to resist the decline. Mohali recorded sales volume of 34 per cent while Lucknow witnessed a 6 per cent rise. In contrast to the other 13 cities, Vishakhapatnam saw a steep drop of 38 per cent. This data is an indicator that the Tier II markets are now mirroring the market behaviour in Tier I, where price rise is overpowering affordable segments, which slows the volume growth.
Centre Stage Taken By Premiumisation
One of the most highlighted insights from the report is the shift towards higher-priced homes in these cities. Homes valued under Rs 1 crore saw sales volumes drop by 15 per cent on a year-on-year basis. Usually, this segment has been the backbone of real estate sales in Tier II cities. As for homes valued above Rs 1 crore, they witnessed a 9 per cent growth rate, which has also increased their share from 23 per cent in 2024 to 28 per cent in 2025.
This reflects changes on the demand and supply side. The rising land and construction costs have pushed the developers to expand their inventory to the premium segments. Meanwhile, the buyers' aspirations have also evolved alongside the improved infrastructure in these cities, credited to the economic and lifestyle growth.
New Launches Decline
Another highlight from the report indicates that the supply has also moderated this year. New housing launched has declined to a humble number of 1,36,243 units from 1,45,139 units in 2024. While Mohali, Bhopal, Ahmedabad and Jaipur saw increases in launches, the remaining 11 cities have declined, namely, Surat, Vadodara, Gandhinagar, Nashik, Nagpur, Bhubneshwar, Lucknow, Coimbatore, Goa, Vishakapatnam and Kochi. Of all the Tier II cities, Bhubaneshwar recorded the sharpest decline of 57 per cent.
Here, the supply had dropped in both categories of homes under Rs 1 crore and above.
Growth With Caution
The slowdown does not indicate weakness in the Tier II real estate fundamentals; it shows a growth transformation that is unfolding in these cities. As these cities grow economically, the buyer's preference is shifting to what is already a practice in the prime metro markets. As of now, Tier II housing markets have remained steady in the long-term growth path, but the era of purely volume-driven expansion is seeing a slowdown.
