Mumbai (Maharashtra) [India], September 18 (ANI): Residential prices in 11 emerging Tier-2 markets have grown nearly twice as fast as those in India's top eight cities over the past decade, pointing to a widening role for smaller cities in the country's next phase of real estate growth, according to a CII-Knight Frank India report.

The report said residential prices across Bhopal, Bhubaneswar, Chandigarh Tricity, Goa, Indore, Jaipur, Kochi, Lucknow, Nagpur, Visakhapatnam and Coimbatore recorded an average compound annual growth rate (CAGR) of 8 per cent between 2016 and 2026, compared with 4 per cent across the top eight cities.

The gap has widened in recent years. Residential prices across the 11 emerging markets increased 63 per cent between 2021 and 2026, compared with 42 per cent growth across the top eight cities, the report said.

The report attributed the momentum to strengthening economic fundamentals in these markets, supported by infrastructure, connectivity and consumption. It said Tier-2 and Tier-3 cities are becoming increasingly important growth anchors, even as the top eight cities continue to account for a large share of the sector by volume.

"India's real estate growth is increasingly broadening beyond the traditional metropolitan centres," Shishir Baijal, Chairman and Managing Director, Knight Frank India, said.

He said the opportunity in smaller cities would depend not only on infrastructure creation but also on their ability to convert better connectivity into sustained economic activity through employment, enterprise, population growth, consumption and urban capacity.

Infrastructure spending could provide further support. The share of infrastructure expenditure in total government capital expenditure increased to 55 per cent in FY26 from 39 per cent in FY15, while the government's three-year public-private partnership pipeline comprises 852 projects with a combined cost of Rs 17 lakh crore, the report said.

Commercial activity is also expanding. Key Tier-2 markets recorded 11.2 million sq ft of warehousing lease transactions in 2025, with six of the identified emerging markets accounting for 5.3 million sq ft. Meanwhile, 24 Tier-2 cities accounted for 36 million sq ft of India's 134 million sq ft organised shopping-centre stock in 2025.

The report further said India's real estate sector could reach USD 5.8 trillion by 2047, with Tier-2 and Tier-3 cities estimated to contribute 25-30 per cent, or USD 1.4-1.7 trillion. It said this opportunity would depend on serviced land, efficient approvals, reliable utilities and infrastructure that generate employment and enterprise. (ANI)