India retail shift: Tier II–III cities powering new phase of real estate growth; here’s what’s fueling the surge

India’s retail landscape is undergoing a major shift as smaller cities begin to drive the country’s organised retail expansion, according to new industry assessments. As per news agency ANI, Cushman & Wakefield’s Q3 2025 Retail Market Beat shows a sharp rise in leasing activity across Tier II and Tier III cities this year, reflecting stronger retailer confidence and changing consumer preferences.This trend is further reinforced by the Colliers–CII study, “Real Estate @ 2047: Building India’s Future Growth Corridors.” The report projects India’s real estate sector could reach $10 trillion by 2047, with a significant part of future retail development expected to come from non-metro markets.Rising disposable incomes, upgraded infrastructure, and wider brand penetration are helping fuel this shift. Consumers in these cities are spending more on lifestyle categories and experiences, pushing developers towards retail formats that combine shopping, entertainment, and dining.As cited by ANI, Nandini Taneja, CEO of Bhumika Enterprises, said India’s smaller cities are quickly becoming important retail hubs. She noted, “Consumers in Tier II and Tier III cities are more aspirational today and are spending more on lifestyle and experiences. Because of this, retail in these markets is shifting from unorganised shops to modern, well-designed spaces.”Prakhar Agrawal, director of Rama Group, said that cities such as Raipur, Vizag, and Bhubaneswar have emerged as central drivers of growth. He added, “As India’s retail real estate sector expands beyond metros, these cities are emerging as key growth engines. Rising consumer aspirations, improved infrastructure, and demand for branded retail and leisure experiences are driving this transformation.”Cushman & Wakefield’s latest data shows fashion, food and beverage, and entertainment leading the leasing momentum in these emerging markets, reflecting how consumers are prioritising experiences over pure retail spending.Adish Oswal, chairman of Oswal Group, also pointed to the growing influence of Tier II locations. He said that cities like Ludhiana, Indore, Jaipur, and Lucknow are witnessing rising incomes, better connectivity, and a renewed aspirational mindset, all contributing to a surge in organised retail demand.According to ANI, developers, brands, and investors view these cities as significant growth corridors where modern retail can reach new audiences. With expanding aspirations and improving infrastructure, India’s next phase of retail real estate growth is expected to be broad-based and multi-city, shaped by both consumer demand and investor confidence in emerging markets.