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Home loan demand in India is increasingly shifting away from core metropolitan markets, with Tier-2 and Tier-3 cities emerging as the primary drivers of growth. A report by fintech-led mortgage distribution platform Urban Money shows that these smaller cities recorded significantly higher year-on-year growth in home loan volumes compared to Tier-1 markets. As a result, their share of total home loan volumes has risen further. The report indicates that housing finance growth is becoming more geographically distributed, driven by improved infrastructure, expanding employment hubs and sustained availability of mid-income housing. While premium borrowing remains concentrated in select metros, affordability-led demand in emerging cities is strengthening the housing finance ecosystem.
Home loan demand in India is increasingly moving away from core metropolitan markets, with Tier-2 and Tier-3 cities emerging as the dominant contributors to growth, according to a report released earlier this week by fintech-led mortgage distribution platform Urban Money. Advertisement
The report stated that Tier-2 and Tier-3 cities recorded an 81 per cent year-on-year growth in home loan volumes in 2025, significantly outpacing the 52 per cent growth reported in Tier-1 cities. This sharp expansion has increased the contribution of Tier-2 and Tier-3 markets to 64 per cent of total home loan volumes in 2025, compared to 60 per cent in the previous year. The trend highlights what the report described as a structurally broader and more distributed housing finance cycle.
According to the findings, housing demand growth is no longer concentrated in a limited number of large metropolitan centres or premium price segments. Instead, improving infrastructure connectivity, the expansion of employment hubs and the sustained availability of mid-income housing are supporting stronger homeownership demand across emerging cities. The report also noted that affordability pressures in core metros are pushing a growing segment of aspirational homebuyers to enter the market through smaller cities and peripheral urban corridors.
Urban Money highlighted strong borrower activity across several Tier-2 and Tier-3 markets, including Chandigarh, Jaipur, Surat, Madurai and Palwal. These cities recorded notable increases in loan creation during the year, reflecting deeper penetration of formal housing finance beyond India's largest urban centres. The scale and consistency of growth across these locations point to a more balanced expansion of housing credit.
Urban Money co-founder Amit Prakash said the housing finance market in India is becoming more broad-based and structurally balanced. He noted that the current growth cycle is being driven by steady expansion in first-time and mid-income homeownership across a wider range of cities. While premium borrowing remains limited to a few high-income markets, he said the larger momentum is affordability-led, supported by infrastructure development and rising aspirations beyond core city centres. He added that this distributed demand base strengthens the long-term stability of the housing finance ecosystem.
The report also pointed out that premiumisation continues to be concentrated in select markets. Mumbai, Gurugram and Hyderabad recorded close to 20 per cent year-on-year growth in average loan ticket sizes, underscoring the divergence between volume-led growth in emerging cities and value-led growth in established metros.
Source - PTI
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