Leasing activity accelerates in Tier 2 and 3 markets as rising incomes, better infrastructure and lifestyle demand reshape India’s retail growth map
India’s retail real estate market is undergoing a structural shift as smaller cities take centre stage in driving new demand. Fresh data from Cushman & Wakefield’s Q3 2025 Retail Market Beat shows a sharp rise in leasing activity across tier 2 and 3 locations, underscoring strong retailer appetite and evolving consumption patterns outside major metros.
This trend aligns with findings from the Colliers–CII report, Real Estate @ 2047: Building India’s Future Growth Corridors, which anticipates that the country’s property market could reach USD 10 trillion by 2047, with non-metro cities playing a pivotal role in the next wave of retail expansion.
Rising disposable incomes, improving infrastructure, and deeper brand penetration are fuelling this growth. Shoppers in these regions are increasingly spending on leisure-led formats, prompting developers to integrate entertainment and dining with traditional retail footprints.
Nandini Taneja, CEO of Bhumika Enterprises, says, “Beyond the metros, India’s smaller cities are quickly becoming important retail markets. Consumers in tier 2 and 3 cities are more aspirational today and are spending more on lifestyle and experiences. Because of this, retail in these markets is shifting from unorganised shops to modern, well-designed spaces.”
Prakhar Agrawal, Director, Rama Group, notes that cities such as Raipur, Vizag and Bhubaneswar are becoming major demand centres.
He says, “As India’s retail real estate sector expands beyond metros, these cities are emerging as key growth engines. Rising consumer aspirations, improved infrastructure, and demand for branded retail and leisure experiences are driving this transformation.”
Cushman & Wakefield’s latest quarterly data indicates that fashion, food and beverage, and entertainment remain the strongest contributors to leasing momentum, reflecting how experience-driven spending is shaping new market dynamics.
Adish Oswal, Chairman of Oswal Group, noted that India’s retail landscape is evolving rapidly, with much of the momentum now coming from tier 2 cities. He pointed out that locations such as Ludhiana, Indore, Jaipur and Lucknow are witnessing higher incomes, improved connectivity and rising aspirations, all of which are fuelling demand for modern retail and lifestyle-oriented developments.
He added that these cities present significant opportunities for developers, investors, and brands to tap into new customer segments, experiment with fresh retail formats, and be part of the next phase of organised retail expansion in India. According to him, the sector’s upcoming growth wave will be spread across multiple cities, powered by rising consumer aspirations and growing investor confidence in emerging markets.
