Housing supply in India’s top 15 tier 2 cities witnessed a sharp 35 per cent year-on-year decline in the January–March 2025 quarter, falling to 30,155 units from 45,901 units in the same period last year, according to a report by NSE-listed real estate data analytics firm PropEquity.

The report revealed a significant shift in market dynamics, with launches of affordable homes (priced under Rs 50 lakh) dropping drastically, while the mid-segment (Rs 50 lakh–Rs 2 crore) gained traction. In Q1 2025, 48 per cent of new launches were in the Rs 50 lakh – Rs 1 crore price bracket, up from 36 per cent in Q1 2024.

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Among individual cities, Bhubaneshwar registered the steepest fall in housing supply at 72 per cent, with only 772 units launched in Q1 2025. In contrast, Nashik saw the smallest decline at just 2 per cent, recording 2,466 units.

Regionally, Eastern and Central India saw the highest decline in new housing 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.

Seven state capitals included in the analysis also recorded a significant 43 per cent drop in new supply, underscoring the broad-based slowdown across urban centers in tier 2 markets.

The report highlighted a dramatic fall in the supply of affordable homes. Units priced below Rs 50 lakh dropped by more than half—from 15,420 units in Q1 2024 to 7,124 units in Q1 2025—bringing their share of total supply down from 33 per cent to 24 per cent.

State capitals experienced a particularly severe impact, with the supply of homes priced under Rs 50 lakh plummeting by 90 per cent in Q1 2025.

While the absolute number of homes in the Rs 50 lakh–Rs 1 crore range fell 12 per cent, their share of total supply increased from 36 per cent to 48 per cent. Similarly, units priced between Rs 1–2 crore declined 17 per cent in volume, but their share rose from 18 per cent to 23 per cent. In contrast, the supply of units priced above Rs 2 crore plunged 73 per cent, reducing their share from 13 per cent to just 5 per cent.

Overall, homes priced below Rs 2 crore accounted for 95 per cent of the total new supply in Q1 2025, up from 87 per cent a year earlier.

Commenting on the trend, Samir Jasuja, Founder and CEO of PropEquity, said, “The decline in supply is a result of a cautious approach and shifting priorities by developers. Financially robust players are focusing on launching premium homes to improve profit margins. Affordable housing under Rs 50 lakh has become increasingly unviable.”

Jasuja added that with home loan rates hovering around 8–8.5 per cent, the recent 50 basis points reduction in the repo rate by the RBI is expected to boost buyer sentiment in the Rs 50 lakh–Rs 2 crore segment.

“The tier 2 cities present a huge opportunity for corporates and developers. Massive infrastructure development and the government’s thrust on making these cities growth drivers will further enable end-user demand,” he said.