Real Estate Investment Grows in Tier-2 Cities As Metros Lose Their Shine | Savings and Investments News

Last Updated:July 12, 2025, 15:39 IST

India’s second tier cities are gaining momentum in real estate investment as prices in metro cities are skyrocketing.

Investing in second-tier cities’ rental markets can present some of the best opportunities in the country, typically having yields in the range of 4-6 percent yearly, in comparison to 2-3 percent in larger metro areas.

The real estate landscape in India is undergoing a significant shift. Investors are increasingly turning their focus away from traditional metros and toward second-tier cities such as Pune, Chandigarh, Indore, Bhubaneswar, and Coimbatore. These cities are not only more affordable but also offer stronger infrastructure, better demographics, and promising returns.

Second-tier cities are going through an unprecedented phase of growth by being positioned perfectly between affordability and quality of life, said Anurag Goel, Director of Goel Ganga Developments.

“We are seeing uninterrupted demand from end-users and investors alike, who are able to see the long-term value proposition in these markets,” he added.

This viewpoint demonstrates the evolving sentiments of confidence in tier-two markets where property prices remain affordable while living, economic and employment prospects continue to increase with the improvement of infrastructure. Tier-2 cities are developing into IT parks, educational institutions, Stronger health care and now there are some eventual sustainable demand drivers that provide stability in property prices.

Rental Yields Outperform Major Metros

Investing in second-tier cities’ rental markets can present some of the best opportunities in the country, typically having yields in the range of 4-6 percent yearly, in comparison to 2-3 percent in larger metro areas.

Infrastructure Push Boosts Growth Potential

With a growing population of professionals and comparatively lower costs to acquire property, Keshav Mangla, GM Business Development of Forteasia Realty, states “The rental yields in second-tier cities are highly attractive for purpose-built rental projects because of the number of young professionals and families moving there for lifestyle and career ambitions.”

Infrastructure development continues to be a key enabler of real estate development throughout these developing markets. Aman Gupta, Director of RPS Group states, “Government projects to invest in transportation infrastructures such as metro stations, airports and major highways have enhanced the accessibility and attraction of second-tier cities. Properties located along or near these infrastructure corridors are showing exceptional growth in appreciation.” The Smart Cities Mission and several state-level initiatives to advance urban renewal and development has fast-tracked the creation of modern amenities and governance systems similar to those of larger cities.

Manufacturing and Services Drive Demand

Increasing growth in manufacturing and service sectors has further solidified the economic base of second-tier cities. LC Mittal, Director of Motia Builders Group states, “The industrial growth and the movement of corporations to second-tier cities, are leading to jobs that are creating housing needs. We are seeing continued interest from both residential and commercial.” By diversifying to a broader economy, dependence on single industries is reduced and demand drivers for real estate investment increase.

Portfolio Diversification and Risk Mitigation

From a portfolio perspective, second-tier markets provide diversification benefits for real estate investors.  Including properties from second-tier cities in your real estate portfolio can give you better risk-adjusted returns and hedge against market volatility prevalent in the major metros. argues Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara.

He noted second-tier cities develop relative to each other and typically have their own unique economic movements independent from many tier-one cities – therefore, they provide natural diversification.

The combination of affordability, infrastructure/investment needs, economic growth, and demographics combine to position second-tier cities to offer the best investment opportunity going forward in India’s real estate investment landscape, giving investors the ability to focus on the urbanization story within India’s overall economy while also attaining higher returns that may be more difficult from more developed metros.

Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

Varun Yadav

Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More

Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More

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