The mortgage market is seeing a decisive shift with home loan demand moving away from Tier-1 cities, with Tier2-3 citiesemerging as the dominant contributors to growth.

According to Urban Money Homebuyers Credit Pulse Report, Tier-2 and Tier-3 cities recorded an 81% year-on-year growth in home loan volumes in 2025, significantly higher than the 52% growth seen in Tier-1 cities. This sharp expansion has increased the contribution of Tier-2 and Tier-3 markets to 64% of total home loan volumes in 2025, compared to 60% in 2024, highlighting a structurally broader and more distributed housing finance cycle.  

Today, the housing demand growth is no longer concentrated within a few large metros or premium price segments. Instead, improving infrastructure connectivity, expansion of employment hubs and sustained availability of mid-income housing are driving stronger homeownership demand across emerging cities. As affordability pressures persist in core metros, a growing share of aspirational homebuyers is entering the market through smaller cities and peripheral urban corridors.

Tier-2 and Tier-3 cities are leading in volume-led expansion, with strong borrower activity across these markets, particularly Chandigarh, Jaipur, Surat, Madurai and Palwal which recorded significant increases in loan creation in 2025. The scale and consistency of growth across these cities reflect deeper penetration of formal housing finance beyond India’s largest urban centres.

Large urban markets such as Delhi, Ahmedabad and Noida are increasingly reflecting volume-driven growth supported by stable affordability, rather than sharp premiumisation. Delhi and Ahmedabad recorded 61% and 44% year-on-year growth in home loan volumes, even as average loan ticket sizes rose by a measured 12%, indicating a broader base of end-user participation rather than concentration among higher-income borrowers.

 The entry of first-time and mid-income households into the housing market is on the rise, supported by steady income-linked borrowing capacity and sustained supply across mid-priced segments. Noida mirrored a similar trend, with balanced growth across both loan volumes and ticket sizes, reinforcing its position as a structurally affordable extension market rather than a speculative or upgrader-led destination.

According to Amit Prakash, Co-Founder & CBO at Urban Money, the current growth cycle is being driven by steady expansion in first-time and mid-income homeownership across a wider set of cities. While premium borrowing remains limited to a few high-income markets, the larger momentum is clearly affordability-led, supported by infrastructure development and rising aspirations beyond core city centres. This distributed demand base strengthens the long-term stability of the housing finance ecosystem.

While emerging cities are driving volume growth, premiumisation continues to remain concentrated within a few high-income markets. Mumbai, Gurugram and Hyderabad recorded close to 20% year-on-year growth in average loan ticket sizes. Hyderabad and Gurugram also posted strong growth in loan volumes, while Mumbai’s loan volumes remained largely stable, indicating value-led growth driven by affluent upgraders rather than broader borrower participation.

The demand momentum is sustained by peripheral and affordable corridors. Beyond core metros, affordability-led corridors and peripheral markets continue to play a critical role in sustaining housing demand. Navi Mumbai recorded a 55% year-on-year increase in loan volumes, while the Noida–Greater Noida region registered 42% growth in total loan value, reflecting growing buyer preference for relatively accessible and infrastructure-supported micro-markets. At the same time, mature housing markets such as Pune and Kolkata delivered steady and low-volatility growth, with loan volume increases of 9% and 5%, respectively, alongside single-digit growth in average loan ticket sizes, lending balance to the overall housing finance cycle.