Real Estate Boom: Are Tier-2 and Tier-3 cities the next big investment bet?

India’s real estate landscape is undergoing a significant transformation, with Tier-2 and Tier-3 cities emerging as the next growth engines, driven by massive infrastructure development and rising end-user demand.

Land prices may surge up to 100%: Square Yards

According to a recent report by Square Yards, land prices in smaller cities could surge between 25 per cent and 100 per cent over the next two to four years. The shift is being fueled by the government’s aggressive push on infrastructure projects such as metro networks, expressways, airports, and industrial corridors, which are reshaping the economic potential of these regions.

Infrastructure impact visible around Noida International Airport

Speaking on the trend with Zee Business, Sunita Mishra, Vice President–Research & Insights at Square Yards, pointed to the example of the Noida International Airport. She noted that land prices in the surrounding areas have increased nearly fivefold over the past five years, highlighting how infrastructure projects can dramatically alter property markets.

“Execution is the key. As infrastructure projects take shape, price growth accelerates,” she said, adding that the report’s projections are based on timely project completion.

Prime Minister Narendra Modi is set to visit Uttar Pradesh on March 28, 2026, to inaugurate Phase I of the much-anticipated Noida International Airport in Jewar, Gautam Buddha Nagar.

Additionally, Vimal Nadar, National Director & Head, Research, Colliers India, said, "The inauguration and subsequent start of operations at the Jewar International Airport is likely to unlock long-term real estate development in the catchment areas, particularly along the Noida Expressway. Additionally, overall connectivity with Gurugram & Delhi is likely to get a further boost, led by multiple other infrastructure projects which are at various stages of development. The residential market of select micro markets of Noida, such as Yamuna Expressway, Greater Noida and localities along the Noida Expressway, stand to gain traction, especially in the middle-income and luxury segments."

"On the commercial real estate front, the international airport is expected to attract global occupiers in the coming years, further enhancing the value proposition of Noida’s office market. We expect close to 2-3 million sq ft. of annual Grade A office space demand in Noida over the course of the next few years, accounting for almost one-fourth of Delhi NCR’s leasing activity in 2026 and beyond," Nadar added.

Shift from investor-driven to end-user market

However, experts caution that the growth is not uniform across all regions. Pradeep Mishra, a property expert, emphasised that while real demand is visible in areas where infrastructure work has begun, locations with only project announcements are witnessing speculative activity.

“The market is shifting from being investor-driven to end-user driven. But this is not an all-round boom—it is a structural shift,” he said. He also highlighted that while premium housing continues to see strong demand, the affordable housing segment remains under pressure due to rising costs and affordability challenges.

Higher returns, higher risks in land investments

The report also emphasised that land investments tend to deliver the highest returns during the early stages of infrastructure development. However, this segment carries higher risks, including speculative bubbles and fraud, particularly affecting inexperienced buyers.

Liquidity challenges in smaller cities

Liquidity remains another concern in smaller cities. While entry into the market is relatively easy, exiting investments—especially in resale—can take longer compared to metro cities. That said, improving infrastructure, job creation, and the entry of organised developers are gradually strengthening market depth and buyer confidence.

Job creation key to sustaining housing demand

The role of employment in maintaining growth in the real estate sector is also important to note. Experts have observed that infrastructure development is often accompanied by new employment opportunities, which in turn will fuel housing demand. Government moves to spur economic activity in smaller cities will also support this trend.

Affordable housing faces supply constraints

In spite of this demand, the affordable segment is lacking in supply. With increasing prices for land and construction, developers are shifting to premium and luxury segments, thus affecting the availability of affordable properties.

Developers eye emerging markets, like Ayodhya

Meanwhile, experts pointed out that large real estate companies are increasingly looking at emerging markets like Ayodhya, which offers infrastructure and tourism-based growth opportunities. As the growth rate slows down in Tier 1 cities, other small cities are emerging as attractive investment destinations.

Experts advise cautious, research-driven investment

Experts recommend that homebuyers and investors be cautious and research-oriented while investing in the property sector. It is crucial to understand the plans of the government, infrastructure projects, and legal clearances before investing.

Global factors add cost pressure to real estate

In a related development, global factors are also beginning to influence India’s real estate sector. Disruptions in the Strait of Hormuz due to ongoing geopolitical tensions are impacting supply chains, leading to increased costs of construction materials such as steel, aluminium, and marble.

Luxury housing prices may rise: Anarock

According to Anarock, this could push up property prices—particularly in luxury markets—by up to 5 per cent. The impact is expected to be most pronounced in Mumbai, which dominates India’s ultra-luxury housing segment and relies heavily on imported materials.

Real Estate Outlook: A sector in transition

As India's real estate market continues to evolve at domestic levels and faces global challenges, the coming years will shape new investment and growth strategies for the country.