Tier-2 and Tier-3 Cities Drive India's Commercial Real Estate Revolution in 2025

Industry experts report that emerging urban centers like Jaipur, Indore, Coimbatore, Nagpur, Kochi, Chandigarh, and Lucknow are spearheading the next phase of commercial real estate expansion across the country, as the sector undergoes a significant geographical transformation.

Rising Prominence of Non-Metro Markets

Real estate analyst Amit Ramani highlighted that India's commercial property landscape, which has been traditionally dominated by metropolitan hubs such as Mumbai, Delhi-NCR, Bengaluru, and Hyderabad for decades, is experiencing a fundamental shift. The narrative is changing as secondary and tertiary cities emerge as frontiers for the next growth phase.

According to industry data, nearly 44% of the 3,294 acres of new land acquired by real estate developers in 2024 were concentrated in Tier-2 and Tier-3 cities, demonstrating the sector's geographic diversification strategy.

Economic Drivers Behind the Shift

Industry sources indicate that this geographic diversification represents more than just a spillover effect from saturated metro markets. Lower land acquisition costs, continuously improving infrastructure, and access to a sizeable talent pool at competitive wages have created compelling business cases for expansion into these emerging markets, benefiting both developers and corporations.

The expansion of high-speed internet connectivity, including the ambitious BharatNet project targeting rural broadband access and the 5G rollout in Tier-2 areas, has reportedly diminished the digital divide between India's metros and smaller cities.

Government Policy Support

State governments across India have introduced several targeted policies to attract commercial developments, according to industry reports. These include tax incentives, simplified approval processes, and dedicated industrial corridors. As a result, IT-focused commercial developments and tech parks are flourishing in Tier-2 and Tier-3 cities nationwide.

These developments are being designed with a focus on sustainability, wellness, and integration with local communities, rather than being mere replicas of their metropolitan counterparts.

Retail and Logistics Transformation

The commercial real estate evolution extends well beyond office spaces, with modern retail infrastructure reshaping consumer experiences across smaller urban centers. Unlike traditional mall formats, new retail developments in Tier-2 and Tier-3 cities are being tailored to reflect regional preferences and cultural nuances.

These spaces are increasingly becoming experiential hubs rather than mere transactional venues, with designated areas for local artisans and handicrafts, as well as cultural performances.

Logistics Sector Boom

Perhaps the most transformative impact is being witnessed in the logistics sector. The implementation of GST, coupled with the development of economic corridors and expressways, has sparked unprecedented demand for warehousing and logistics parks in Tier-2 and Tier-3 cities.

According to a recent report by JLL India, these markets account for around 100 million square feet — or 18.7% — of India's total warehousing capacity.

These facilities are not just storage centers but integrated supply chain solutions bringing previously disconnected regions into the national economic mainstream. Cities located along major strategic transportation routes — such as Nagpur, Hosur, and Ludhiana — are becoming logistics powerhouses.

Social and Economic Impact

The expansion of commercial real estate into Tier-2 and Tier-3 cities is yielding dividends beyond purely economic metrics. The influx of businesses is driving demand for quality education, healthcare, and lifestyle amenities in these regions.

Developers are increasingly adopting integrated township models that combine workspace with residential and social infrastructure. This shift is addressing historical disparities in living standards between metro and non-metro India.

Cities like Mysuru and Chandigarh, which have witnessed significant commercial real estate investments, are now seeing parallel growth in international schools, multi-specialty hospitals, and cultural venues. The retention of local talent, which previously migrated to metros for career opportunities, represents the most significant social outcome of this transformation.

Challenges and Future Outlook

Despite the promising trajectory, significant challenges remain in fully realizing the potential of commercial real estate as a driver of inclusive growth. Infrastructure gaps, particularly in public transportation and airport connectivity, continue to be pain points in many non-metros.

Urban planning frameworks in these cities often struggle to keep pace with rapid commercial development, leading to concerns about sustainable growth. The regulatory environment, while improving, still requires greater standardization across states to facilitate easier business operations.

Skills Development Priorities

Developing a deeper pool of skilled facility management professionals in smaller cities remains a priority for maintaining world-class commercial spaces, according to industry experts.

Looking ahead, the expansion of commercial real estate into non-metros represents more than just a sectoral trend. By creating economic ecosystems that allow businesses to thrive outside traditional urban centers, commercial real estate is enabling a more balanced spatial development model.

As this evolution continues, the sector will increasingly serve as a critical conduit through which capital, technology, and best practices flow from India's established economic centers to its emerging ones. In doing so, commercial real estate is not just constructing buildings but building a more equitable, prosperous future where the fruits of India's economic ascendancy are shared more broadly across its geography.

The true success of India's commercial real estate sector will be measured not solely by the volume of space developed or capital invested but by its ability to expand beyond metro cities, positioning Tier-2 and Tier-3 cities as thriving real estate hubs.