How Tier-2 and Tier-3 Cities Are Emerging as the Smart Choice for NRI and First-Time Investors

How Tier-2 and Tier-3 Cities Are Emerging as the Smart Choice for NRI and First-Time Investors

Chandigarh 24 November ( Ranjeet Singh Dhaliwal ) : Over the last decade, Tier-2 and Tier-3 cities have grown from something not being lucrative enough to being high on the real estate investment radar. This quiet shift, which is a result of their affordability, modern infrastructure development, and a high capacity to grow, has turned their real estate into a highly sought-after asset, not just of Indians but also for Non-Resident Indians and first-time investors. Cities like Mohali, Lucknow, Dehradun, and Indore are leading this transition. Affordability is not the only advantage. The potential for appreciation is proving equally persuasive. According to data cited by The Financial Express, almost 44% of the developer land transactions between 2022 and 2023 took place in Tier-2 and Tier-3 locations. Many of these markets are seeing average annual price growth of 10–15%, outpacing inflation and delivering rental yields in the range of 4–7%, which compares favourably with metro returns that typically hover around 2–3% For instance, an investor from Surat found his Rs. 75 lakh apartment appreciated to Rs.  1.2 crores in just four years - a return rate difficult to achieve in an already saturated urban centre. It's a pattern that is beginning to repeat across India's smaller cities, powered by the country's deeper urbanisation cycle.

 Infrastructure as the Catalyst

The story of the rise of tier 2 & 3 cities is incomplete without mentioning the scale of infrastructure development. Network of new expressways like the upcoming Chandigarh–Ambala Greenfield Corridor, promising to ease congestion across Chandigarh, Zirakpur, Panchkula, Mohali, and Kharar, airports in tier 2 & 3 cities, and the creation of industrial corridors such as the one in Zirakpur have also catalysed real estate development, both residential and commercial,” said - Udit Jain, Director, ONE Group

Government initiatives such as the Smart Cities Mission and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) have also given further impetus. Both of these, together, are working to recreate 100 cities as more planned and technologically enabled urban centers. This structural shift has given investors confidence that Tier-2 and Tier-3 markets are not just affordable alternatives but sustainable long-term destinations,” said Adish Oswal, Chairman, Oswal Group. Beyond economics, lifestyle preferences are changing too. Many professionals who once aspired to metro life now prefer the balance and breathing space that smaller cities offer. The pandemic accelerated this shift proving that work-from-anywhere is viable and thus enabling young families and remote professionals to move closer to their hometowns without sacrificing career growth. Clean air, shorter commutes and a lower cost of living-the appeal is self-explanatory, said Piyush kansal, Executive Director of Royale Estate Group For NRIs, this lifestyle dimension adds emotional overtones. Owning a spacious, modern home in their native city is not just financially appealing but also culturally fulfilling. With overall lower prices, they can invest in larger homes or multiple assets, thus spreading their exposure across growing markets instead of one single high-value metro purchase. Besides, relaxed rules by the Reserve Bank of India for purchasing property and RERA's strong push for transparency have added legal comfort. Put together with an advantageous exchange rate, the purchasing power of NRI investors has risen considerably in the last two years,” said Mr. Umang Jindal, CEO, Homeland Group Mohit Goel, Managing Director, Omaxe Group, says: Tier-2 markets are where the real opportunity lies today. Cities like Lucknow, Chandigarh and Prayagraj are emerging as potential real estate hotspots offering not just land availability at viable prices but also a far superior quality of life. The entry cost in metros has become prohibitive while these cities present affordable yet aspirational options for both developers and buyers. At Omaxe,we’ve long identified this potential with improved infrastructure, better civic amenities and rising lifestyle aspirations these cities are now delivering what every investor looks for growth, value  and long-term livability.New Chandigarh is a prime example of this transformation - Well connected by a 200-foot-wide road linking it directly to adjoining regions and the Chandigarh–Anandpur Sahib Expressway supported by a planned 60-metre arterial road network dedicated institutional hubs like Education City - Medicity and over 30% of the area reserved as green cover. The city’s balanced master planning, sports and recreation zones and self-sustaining urban amenities are rapidly positioning it as one of North India’s most promising real estate destinations.

The Expanding Job Map

Another silent revolution supporting these markets is the diversification in India's employment geography. IT parks, logistics hubs, and industrial zones are no longer confined to the metros. Cities like Coimbatore, Chandigarh, Surat, and Nagpur attract technology and manufacturing firms because of their lower costs and growing local talent pool. This expansion of job opportunities sustains steady housing demand, ensuring property investment is not purely speculative but supported by real economic activity. As Reuters reported earlier this year, technology companies are increasingly "plugging into India's smaller cities" to tap into fresh talent and cut operating expenses. That, in turn, feeds ancillary growth in housing, retail, and infrastructure-the classic indicators of an upward real estate curve. A new chapter is unfolding in India's real estate story, and this time it is being driven not by the metros but by the momentum of the next 100 cities. For NRIs seeking high-value homes and for first-time buyers looking to step onto the property ladder, Tier-2 and Tier-3 cities offer a sweet spot of affordability, appreciation, and aspiration. As the nation's urban landscape continues to expand, these once peripheral markets are fast becoming central to India's growth narrative. In a way, the real estate future of the country is going back to its roots-smaller cities that are big on potential. For investors willing to look beyond the obvious, the next decade may well belong to the Tier-2 and Tier-3 cities of India.