Tier 2 cities’ housing slumps in Q1: Affordable supply falls 54%, says report; developers shift focus to premium housing

NEW DELHI: The affordable housing segment in India’s 15 major tier 2 cities witnessed a sharp 54 per cent decline during the January-March quarter (Q1) of 2025, according to the latest analysis by real estate data firm PropEquity, quoted by ANI. Overall new housing supply in these cities dropped by 35 per cent year-on-year to 30,155 units in Q1 2025, compared to 45,901 units during the same period last year. Homes priced between Rs 50 lakh and Rs 1 crore comprised 48 per cent of the new launches this year, up from 36 per cent in Q1 2024. Among individual cities, Bhubaneshwar recorded the steepest fall, with a 72 per cent reduction to 772 units. Nashik saw the smallest dip, with a 2 per cent decline to 2,466 units. Regionally, Eastern and Central India witnessed the sharpest drop in new launches at 68 per cent, followed by Northern India at 55 per cent, Western India at 28 per cent, and Southern India at 26 per cent. Supply in the seven state capitals among the top 15 tier 2 cities fell by 43 per cent. Samir Jasuja, Founder and CEO of PropEquity, said the drop in supply reflects a strategic shift by developers. “The decline in supply is a result of cautious approach and shifting priorities by developers. Financially robust developers with strong balance sheet look to launch premium homes in order to increase their profit margin. As a result, supply of homes under Rs 50 lakh has seen a consistent decline due to its unviability,” he said. He further added, “Meanwhile, homes priced between Rs 1-2 crore have not only seen a 17 per cent Y-o-Y growth in supply but also its supply share increasing from 18 per cent to 23 per cent.” According to Jasuja, home loan rates currently remain in the range of 8 to 8.5 per cent, but the RBI’s recent 50 basis point repo rate cut is expected to lower these rates further, which could benefit properties priced between Rs 50 lakh and Rs 2 crore in tier 2 cities. He said, “The tier 2 cities present a huge opportunity for corporates and developers as massive infrastructure development and government’s focus on making these cities as growth drivers will enable end-user demand.“ As per the data, 95 per cent of new housing supply in Q1 2025 came from units priced below Rs 2 crore, up from 87 per cent a year ago. The supply of homes under Rs 50 lakh saw a significant fall, dropping from 15,420 units in Q1 2024 to 7,124 units in Q1 2025, reducing their market share from 33 per cent to 24 per cent. Units priced between Rs 50 lakh and Rs 1 crore declined by 12 per cent in volume but rose in share from 36 per cent to 48 per cent. Properties in the Rs 1–2 crore range declined 17 per cent in volume, though their share increased from 18 per cent to 23 per cent. Homes priced above Rs 2 crore saw a steep 73 per cent fall in supply, shrinking their share from 13 per cent to 5 per cent. In the seven state capitals, supply of homes below Rs 50 lakh dropped by 90 per cent, while units in the Rs 50 lakh to Rs 1 crore category declined by 13 per cent. However, the Rs 1–2 crore segment saw a 31 per cent increase in supply during the quarter.