Housing supply in Tier-2 cities falls 35% in Q1 2025; sub-Rs 50 lakh homes hit hardest

Housing supply in Tier-2 cities falls by 35% in Q1 2025, houses under Rs 50 lakh worst hit

Housing supply in India’s top 15 tier-2 cities fell by 35 percent to 30,155 units in the January-March period of 2025 even as 48 percent of the new launches were in the Rs 50 lakh to Rs 1 crore price range, according to a report by NSE-listed real estate data analytics firm PropEquity.

According to the report, which was released on June 12, Bhubaneshwar witnessed the highest decline at 72 percent to 772 units in Q1 2025 while Nashik saw the least decline at 2 percent to 2,466 units. Supply of housing units priced under Rs 50 lakh fell by 54 percent in Q1 2025.

Six state capitals, which include Lucknow, Jaipur, Goa, Bhopal, Bhubaneshwar and Thiruvananthapuram, saw at least a 43 percent decline in supply in Q1 2025. The report added that Eastern and Central India, with a 68 percent fall in new launches in Q1 2025, saw the highest decline, followed by a 55 percent fall in Northern India, 28 percent in Western India, and 26 percent in Southern India.

Changing dynamics

Market observers said that the fall in supply stems from developers' increased caution and changing strategic focus.

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Samir Jasuja, founder and CEO, PropEquity, said that tier-2 cities present a huge opportunity for corporates and developers as massive infrastructure development and the government’s focus on making these cities as growth drivers will enable end-user demand.

“The decline in supply is a result of a cautious approach and shifting priorities by developers. Financially robust developers with strong balance sheets look to launch premium homes in order to increase their profit margin. As a result, the supply of homes under Rs 50 lakh has seen a consistent decline due to its unviability. The supply of units priced between Rs 1 crore and Rs 2 crore fell by 17 percent but its supply share increased from 18 percent to 23 percent Y-o-Y, in Q1 2025,” he said.

Jasuja added that the recent 50 basis-point reduction in the repo rate by the RBI will further drive down the home loan rates, thereby providing an impetus in the Rs 50 lakh-Rs 2 crore priced homes in tier-2 cities.

Price-wise supply trend

State capitals saw a 90 percent drop in the supply of units priced under Rs 50 lakh and a 13 percent drop in the supply of units priced between Rs 50 lakh and Rs 1 crore in Q1 2025. However, the supply of units priced between Rs 1 crore and Rs 2 crore rose by 31 percent in state capitals, the report said.

The supply of units priced under Rs 50 lakh more than halved to 7,124 units in Q1 2025 as against 15,420 units in the same period last year. Its share of the total supply fell from 33 percent in Q1 2024 to 24 percent in Q1 2025.

Similarly, the supply of units priced between Rs 50 lakh and Rs 1 crore dipped by 12 percent and the supply of units priced between Rs 1 crore and Rs 2 crore fell by 17 percent. The supply of units priced Rs 2 crore and above dipped by 73 percent in Q1 2025 and its share fell from 13 percent in Q1 2024 to 5 percent in Q1 2025, the report said.