India’s Tier-2 real estate markets experienced a significant slowdown in new housing supply in Q1 2025, according to the latest report by NSE-listed PropEquity. New residential launches dropped by a substantial 35% year-on-year, reflecting a cautious stance by developers and a strategic shift towards mid-premium and premium housing segments.
The report highlights a notable concentration of new supply in the ₹50 lakh to ₹2 crore price range, even as budget housing below ₹50 lakh witnessed a steep drop in both volume and market share.
New Launches Plunge in Top Tier-2 Cities
Key Findings:
- Overall housing supply in the top 15 Tier-2 cities dropped to 30,155 units in Q1 2025 from 45,901 units in Q1 2024.
- 48% of new units were priced between ₹50 lakh and ₹1 crore.
- 90% of new inventory was priced below ₹2 crore, showcasing a clear tilt towards mid-income buyers.
Regional Highlights:
- Eastern and Central India recorded the sharpest decline at 68%, followed by North India (55%), West (28%), and South (26%).
- Among individual cities:
- Bhubaneshwar saw the highest drop of 72%.
- Ahmedabad witnessed a 35% decline.
- Nashik experienced the least decline, down by just 2%.
- Coimbatore was the only city to record growth, with a 127% jump in new supply.
Affordable Segment Shrinks, Premium Homes Hold Ground
The steepest contraction occurred in the sub-₹50 lakh segment, which fell by more than 50%, from 15,420 units in Q1 2024 to 7,124 units in Q1 2025. This segment’s share also dropped from 33% to 24% of total supply.
Conversely, the ₹1-2 crore segment saw:
- A 17% decline in absolute numbers.
- But an increase in market share from 18% to 23%.
- In state capitals, this segment actually grew by 31%, signaling robust demand from upper-middle-class homebuyers.
Quick Highlights Table
| Metric | Q1 2024 | Q1 2025 | Change |
|---|---|---|---|
| Total Supply | 45,901 units | 30,155 units | -35% |
| Under ₹50L | 15,420 units | 7,124 units | -54% |
| ₹50L–1 Cr | ~16,500 units | ~14,474 units | -12% |
| ₹1–2 Cr | ~8,262 units | ~6,858 units | -17% |
| ₹2 Cr+ | ~5,967 units | ~1,508 units | -73% |
Developer Outlook and Market Dynamics
Samir Jasuja, Founder and CEO of PropEquity, explained the supply shift:
“The decline in supply is a result of a cautious approach and shifting priorities by developers. Financially robust developers with a strong balance sheet look to launch premium homes in order to increase their profit margin. As a result, the supply of homes under ₹50 lakh has seen a consistent decline due to its unviability.”
He added:
“With home loan rates hovering around 8-8.5%, the recent reduction of 50bps in repo rate by the RBI will further drive down the home loan rates, thereby providing an impetus in the ₹50L-2cr priced homes in tier 2 cities.”
“Tier-2 cities present a huge opportunity for corporates and developers as massive infrastructure development and the government’s focus on making these cities as growth drivers will enable end-user demand.”
FAQs
1. Why has housing supply declined in Tier-2 cities in Q1 2025?
Due to a cautious developer approach, unviability of affordable housing, and a strategic pivot to premium segments, total housing supply declined by 35%.
2. Which price segment dominates new housing supply in Tier-2 cities?
The ₹50 lakh to ₹1 crore segment dominated with a 48% share of new launches, followed by the ₹1-2 crore segment at 23%.
3. Which city saw the highest increase in supply?
Coimbatore was the only city to register an increase, with a 127% jump in supply from 477 to 1,077 units.
4. What is the trend in affordable housing supply?
Units priced under ₹50 lakh more than halved, with their share falling from 33% to 24% year-on-year.
5. How have state capitals performed in terms of supply?
State capitals in Tier-2 cities saw a sharp 43% drop in total supply and a 90% drop in units priced below ₹50 lakh.