India’s residential real estate market in major Tier-2 cities witnessed a noticeable slowdown in 2025, with housing sales across the top 15 cities falling by nearly 10% year-on-year. The dip reflects a period of demand moderation following the strong post-pandemic recovery phase seen over the past few years.

Key Highlights

• Housing demand weakened across major Tier-2 cities due to rising prices, interest rates, and affordability concerns.
• Experts expect housing sales recovery driven by infrastructure development, improved affordability, and stabilizing economic conditions.

Industry experts attribute the slowdown primarily to rising property prices, elevated home loan interest rates, and increasing construction costs, which collectively impacted buyer sentiment. While housing demand in large metropolitan markets remained relatively stable, affordability pressures in Tier-2 cities led many potential homebuyers to delay purchase decisions.

Cities such as Jaipur, Indore, Coimbatore, Kochi, and Lucknow experienced softer absorption levels, especially in the mid-income and affordable housing segments. Developers in these markets reported cautious buyer behavior, with customers adopting a wait-and-watch approach amid uncertain economic conditions and inflationary concerns.

However, the decline in overall sales did not translate into a complete demand freeze. Select Tier-2 cities with strong employment hubs, infrastructure development, and improving connectivity continued to witness healthy traction. Markets benefiting from industrial expansion, IT investments, and government-led infrastructure projects showed relative resilience.

Industry analysts believe the current slowdown represents a phase of consolidation rather than a structural downturn. With expectations of interest rate moderation, improved affordability, and sustained urban migration, housing demand in Tier-2 cities is projected to regain momentum over the next few quarters.

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Developers are also recalibrating their strategies by focusing on right-sized inventory, flexible payment plans, and customer-centric offerings to revive demand. As economic stability strengthens and buyer confidence improves, Tier-2 cities are expected to continue playing a vital role in India’s long-term residential growth story.