India, the fastest-growing major economy, is on track to becoming a $5.0 trillion economy by FY2026-27. To achieve this ambitious goal, a significant shift in focus is underway. While tier-1 cities remain important, the focus is gradually shifting to the upcoming urban centres.

Tier-2 cities in states like Uttar Pradesh are poised for a real estate boom with projects exceeding Rs 50,000 crore, promising substantial job creation for the state’s youth, according to government sources. Notably, key developments are underway in Moradabad, Noida, and Ayodhya, attracting attention from prominent real estate firms, both domestic and international. Also, the real estate industry body, the National Real Estate Development Council (NAREDCO), recently highlighted the positive impact of the new Ram Temple on Ayodhya’s real estate. It is anticipated that the city will see significant improvements in its real estate infrastructure.

According to a report by Cushman and Wakefield, tier-2 cities such as Bhubaneswar, Coimbatore, Indore, Jaipur, Kochi, Lucknow, Nagpur, Surat, Thiruvananthapuram, and Visakhapatnam are emerging as promising destinations for real estate development.

Lower land values and higher profit margins in these tier-2 cities are attracting developers, leading to organized growth in the real estate sector.

Also Read: When is the right time to increase your credit card limit?

Luxury Housing Boom in Tier-2 Cities

Building on this momentum, the luxury real estate segment is experiencing a surge in demand beyond metropolitan areas. Factors such as soaring property prices, increased economic activity, and robust amenities like schools and hospitals are driving this shift. ANAROCK’s Consumer Sentiment Survey indicates that 26% of property investors are now inclined towards tier-2 and tier-3 cities, reflecting a changing trend in real estate investment preferences.

Driving Forces Behind Investments in Tier-2 Cities

Rapid urbanization, with a rise from 32% in 2013 to around 36% in 2023, is straining existing infrastructure in tier-1 cities. This shift is diverting attention towards tier-2 and tier-3 cities with untapped development potential.

Unlike major cities struggling with limited infrastructure, tier-2 cities can implement greenfield infrastructure projects. Government initiatives like Smart Cities and AMRUT are providing substantial support, leading to employment opportunities, capital appreciation, and enhanced rental values.

Additionally, the government’s smart city plan has triggered rapid infrastructure development in tier-2 cities, including the introduction of metro services in cities like Kochi, Jaipur, and Lucknow. Well-established airports and super corridors further enhance connectivity, making these cities attractive for property investments.
Furthermore, the greater reach of e-commerce, coupled with growing aspirations and discretionary spending, is fuelling demand for retail spaces in tier-2 cities. Over 30 major domestic and international retail brands have entered 14 tier-2 cities, according to a report by CBRE, signalling the growing appeal of non-metros among organized retailers.

The Emergence of Luxury Villas in Tier-2 Cities

Luxury residential hotspots are emerging in tier-2 cities, driven by changing buyer preferences and the desire for more significant living spaces. These exceptional homes redefine luxury with their unique designs, flexible layouts, and a fusion of top-notch amenities. Nestled away from the city’s hustle and bustle, these villas offer a tranquil lifestyle, bringing a breath of fresh air to Tier-2 urban living. Boasting lavish interiors and smart living features, these residences not only provide comfort but also elevate the living experience. With a blend of serenity and cutting-edge technology, these premium villas reshape the very definition of luxury in Tier-2 cities, making them an attractive choice for those seeking a refined and exclusive lifestyle.

Investment Potential in Tier 2 Cities

Investors are recognizing the stability and appreciation potential of property prices in tier-2 cities. Luxury villas offer viable investment opportunities for long-term capital gains. As these cities develop and offer a higher quality of life, they become attractive for both residents and investors.

The Future of Luxury Living in Tier-2 Cities

The surge of luxury villas in tier-2 cities is redefining luxury living. Beyond glossy facades and modern interiors, these developments create a deeply personalized, exclusive, and aspirational lifestyle. As more homebuyers seek a heterogeneous mix of luxury and individuality, these upscale offerings are poised to continue their ascent, shaping the future of luxury real estate in tier-2 cities.

(By Pyush Lohia, Director, Lohia Worldspace. Views expressed are the author’s own and not necessarily those of financialexpress.com)