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Tier-2 housing supply falls 35% in Q1 2025, affordable segment hit hardest
New housing supply in India's top 15 tier 2 cities fell by 35 per cent year-on-year (Y-o-Y) to 30,155 units in the January–March quarter (Q1) of 2025, compared to 45,901 units in the same period last year, according to a report by real estate data analytics firm PropEquity.
This drop coincided with a steep 54 per cent decline in affordable housing supply—defined as units priced under ₹50 lakh.
Affordable housing sees sharpest fall
According to the report, the number of units priced under ₹50 lakh declined to 7,124 in Q1 2025 from 15,420 a year ago, with their share in total supply falling from 33 per cent to 24 per cent. In particular, state capitals recorded a staggering 90 per cent drop in supply of homes in this price segment, the firm noted.
Mid-range homes hold share, premium sees drop
Meanwhile, homes in the ₹50 lakh to ₹1 crore price range saw a comparatively mild 12 per cent decline in supply, though their share rose markedly from 36 per cent to 48 per cent this quarter.
Homes priced between ₹1 crore and ₹2 crore witnessed a 17 per cent Y-o-Y increase in new supply, with their share rising from 18 per cent to 23 per cent. In contrast, units priced above ₹2 crore saw a sharp 73 per cent decline, with their share dropping from 13 per cent to just 5 per cent.
East, Central regions hit hardest
Geographically, Eastern and Central India experienced the steepest declines in new housing launches—68 per cent and 66 per cent respectively—followed by North India at 55 per cent. Western and Southern regions were more resilient, with drops of 28 per cent and 26 per cent.
Among the top 15 tier 2 cities, Bhubaneswar saw the sharpest fall in supply at 72 per cent, dropping from 2,804 units in Q1 2024 to just 772 units in Q1 2025. Nashik recorded the smallest decline at just 2 per cent, from 2,509 to 2,466 units.
Developers prioritise premium projects
Explaining the trend, Samir Jasuja, founder and chief executive officer (CEO) of PropEquity, said that developers were adopting a cautious stance and focusing on high-margin projects.
'Financially robust developers with strong balance sheets are looking to launch premium homes in order to increase their profit margin. As a result, supply of homes under ₹50 lakh has seen a consistent decline due to its unviability,' he said.
Despite the downturn, Jasuja emphasised the opportunity tier 2 cities present, citing strong infrastructure development and government efforts to promote them as future growth centres.
'With home loan rates hovering around 8 to 8.5 per cent, the recent 50-basis-point reduction in the repo rate by the Reserve Bank of India will further lower borrowing costs and provide an impetus to the ₹50 lakh to ₹2 crore housing segment in tier 2 cities,' he added.
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