Tier-2 Cities Power India's Growth with Real Estate & Start-ups

India’s economic momentum is shifting from traditional metros like Mumbai and Bengaluru to Tier-2 cities such as Jaipur, Lucknow, Indore, and Kochi.

These cities are drawing investments due to affordability, infrastructure upgrades, and untapped potential. A Prop Equity report shows Lucknow leading Tier-2 real estate with a 25 percent YoY spike in project launches. Government initiatives, including the Rs. 1.47 lakh crore Smart Cities Mission, are improving connectivity through projects like Ahmedabad Metro expansion and Surat-Chennai expressway, while cities like Jaipur and Indore are attracting Global Capability Centers (GCCs).

Key Highlights

• Tier-2 cities post 17.6 percent real estate growth, outpacing metros
• Nearly 50 percent of India’s start-ups now come from Tier-2/3 hubs
• Job creation in Tier-2 cities grew 42 percent, led by IT and manufacturing

Real estate is booming: Tier-2 cities posted 17.6 percent average capital appreciation in mid-2025, surpassing Delhi’s growth rate. Nagpur and Surat saw residential sales surge 30 percent, while Pune offers rental yields up to 10 percent, double those of Mumbai suburbs. NRIs are investing heavily in Pune and Kochi for their mix of affordability and tech-driven growth.

The start-up ecosystem is thriving, with nearly 50 percent of India’s 1.2 lakh recognized start-ups now based in Tier-2/3 cities. Funding reached $1.2 billion in H1 2025, led by edtech and SaaS, with Indore and Jaipur emerging as cost-effective hubs with strong talent pools.

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Job creation in these cities grew 42 percent YoY, outpacing metros. Manufacturing, IT, and MSMEs are key drivers. Though challenges like water shortages and skill gaps persist, government initiatives and private investment signal that Tier-2 cities are set to generate $2 trillion in revenues by 2030, reshaping India’s growth map.