Thursday, 12 November 2026
India’s residential property market is undergoing a geographical shift as smaller cities attract increasing attention from developers, homebuyers and investors. While Mumbai, Delhi-NCR, Bengaluru and Hyderabad remain major centres of real estate investment, cities including Lucknow, Jaipur, Indore, Nagpur and Coimbatore have recorded substantial residential price appreciation, supported by infrastructure improvements, expanding local economies and changing housing demand.
The growth raises questions about whether property prices reflect sustainable economic development or increasingly speculative investment. Although emerging cities have outperformed India’s largest metropolitan markets, conditions differ considerably between locations, making it difficult to characterise the entire segment as overheated.
According to research published by the Confederation of Indian Industry and Knight Frank India in September 2026, residential property prices across 11 emerging markets increased by approximately 63% between 2021 and 2026, compared with 42% across India’s eight largest property markets.
The research covers Bhopal, Bhubaneswar, Chandigarh Tricity, Goa, Indore, Jaipur, Kochi, Lucknow, Nagpur, Visakhapatnam and Coimbatore. Between 2016 and 2026, these emerging markets recorded average annual price growth of approximately 8%, compared with 4% across the major metropolitan markets.
The figures demonstrate that residential price appreciation is no longer concentrated in India’s largest cities. However, they represent aggregated performance rather than identical growth across individual locations. Employment opportunities, infrastructure investment and housing supply continue to influence local conditions.
Transport infrastructure has been an important factor supporting development. New highways, ring roads, airport improvements and urban transport projects have increased accessibility, encouraging residential construction in previously peripheral districts. Improved connectivity can expand suitable development areas and raise land values, although prices based on anticipated infrastructure improvements may become difficult to sustain if projects are delayed.
Economic diversification is also supporting housing demand. Several Tier-II cities have established manufacturing industries, educational institutions, administrative functions and expanding service sectors. These activities provide employment and household demand that is not entirely dependent on speculative investment.
However, the contribution of India’s technology sector requires careful interpretation. Global capability centres accounted for approximately 43% of national office leasing during the first half of 2026, according to CBRE, but most activity remained concentrated in established metropolitan markets. National leasing figures therefore cannot establish substantial employment growth across individual Tier-II cities.
Lucknow is benefiting from infrastructure investment and urban expansion. As the capital of Uttar Pradesh, its administrative economy is supported by education, healthcare, retail and services. Improved regional connectivity has encouraged development beyond established residential districts, although projects in peripheral locations remain dependent on infrastructure completion and sustained occupier demand.
Jaipur has attracted residential investment through tourism, commercial activity, education and improved transport connections. Road and urban transport improvements have encouraged development in new districts, but price performance varies according to accessibility, services and proximity to employment. Some locations may reflect expectations of future growth rather than established occupier demand.
Indore’s residential market benefits from manufacturing, trade, education and business services. Its industrial and commercial activities support household formation and housing requirements. Continued urban expansion has encouraged construction, although market performance will depend on the balance between new supply and actual transactions.
Nagpur’s market is influenced by its central location and investment in transport and industrial infrastructure. Road and rail connections, together with the Multi-modal International Cargo Hub and Airport at Nagpur, have contributed to expectations of additional logistics and manufacturing activity. However, the benefits of major infrastructure projects may take time to translate into housing transactions.
Coimbatore benefits from an established manufacturing economy, particularly engineering, textiles and industrial production. Educational institutions and commercial services provide additional support for residential demand. Its established economic base distinguishes it from locations where development is more dependent on proposed infrastructure projects.
These differences demonstrate why India’s emerging residential markets cannot be assessed as a single economic category. Administrative centres, industrial cities and tourism destinations respond to different sources of demand.
CRISIL reported in July 2026 that residential demand across its selected Tier-II markets had grown at an annual rate of approximately 14% between FY2021 and FY2026, with Nagpur, Coimbatore and Lucknow recording particularly strong activity. The findings suggest that price appreciation has accompanied an expansion in housing demand, although the balance between new construction and sales remains important.
Rapid price growth does not necessarily indicate speculative overheating. Values can increase because of higher construction costs, limited land availability, infrastructure improvements and stronger household demand. However, sustained appreciation becomes more concerning when it substantially exceeds income growth or depends heavily on expectations of further price increases.
Affordability remains an important measure of market sustainability. Although homes in smaller cities generally cost less than comparable properties in major metropolitan areas, local earnings are also often lower. Rising mortgage costs and higher property prices can restrict purchasing capacity, particularly where new developments target buyers beyond the established local income base.
Housing supply presents another potential risk. Strong sales can encourage additional construction, but excessive development may eventually create an imbalance between completed properties and genuine buyer demand. This is especially relevant in peripheral corridors where projects are launched in anticipation of transport improvements or industrial investment.
For developers, Tier-II markets offer opportunities to diversify beyond India’s largest cities, supported by land availability and demand for improved housing. However, investment decisions require careful assessment of local market depth, competing developments and infrastructure delivery.
Institutional investors face similar considerations. Emerging cities provide exposure to expanding regional economies, but transaction transparency, liquidity and market depth can differ considerably from established metropolitan locations. Distinguishing genuine end-user demand from investment-led purchasing is therefore important.
Growth in retail, logistics and commercial property may contribute to longer-term residential demand through employment creation. Nevertheless, expansion in these sectors does not automatically guarantee continued housing price appreciation.
India’s emerging residential markets remain supported by infrastructure development, economic diversification and changing household requirements. The substantial price increases recorded between 2021 and 2026 demonstrate growing interest outside the country’s largest metropolitan areas, but they do not establish that all smaller cities are experiencing unsustainable growth.
The greater risk may be concentrated in individual neighbourhoods where land values and residential prices have increased ahead of confirmed infrastructure improvements or measurable occupier demand. As India’s property market becomes more geographically diverse, future performance will depend increasingly on the relationship between economic activity, housing supply and actual buyer demand.
Source: © CIJ.World India Research & Analysis Team
