Budget 2025: Real estate boom likely in Tier II and Tier III cities as Finance Minister announces development measures

Finance Minister Nirmala Sitharaman in her Budget speech has made some promising announcements for Tier 1 and Tier 2 cities which is being looked upon by the real estate industry as a positive measure. According to the Finance Minister, in the upcoming budget, the government will give a strong emphasis to infrastructure development in Tier I and Tier II cities. This points towards a strategic shift towards strengthening emerging urban centres beyond the metros. The focus, is on building a future-ready Bharat. This will be done by creating regional growth hubs and improving economic connectivity across the country.Elaborating on the government’s infrastructure roadmap, Sitharaman announced a series of large-scale initiatives. These are aimed at boosting growth in Tier II and Tier III cities which have populations exceeding five lakh. These measures in the budget are proposed so that they support planned urbanisation, improve livability, and create sustainable economic clusters capable of attracting long-term private investment.The Finance Minister announced that public capital expenditure has been raised to ₹12.2 lakh crore for FY 2026–27. This is in line with the government’s continued reliance on infrastructure-led growth. In what is being hailed by the industry experts, the Budget has proposed the creation of dedicated Real Estate Investment Trusts (REITs) to accelerate the monetisation. This will also help in the recycling of significant real estate holdings of Central Public Sector Enterprises (CPSEs). Complementing this is the proposed Infrastructure Risk Guarantee Fund, which will offer prudently calibrated partial credit guarantees to lenders, particularly during high-risk construction and development phases, thereby improving access to finance for infrastructure and real estate projects.To promote decentralised economic development, an allocation of ₹5,000 crore over five years has been earmarked for the development of City Economic Regions. These regions are expected to function as integrated urban-industrial clusters, supporting employment generation and reducing pressure on larger metropolitan centres.Hailing this budget as a big opportunity for real estate boom in smaller cities, Pyush Lohia, Director Lohia Worldspace says,” The government plans to invest money in City Economic Regions. This will help cities that are not as big as the major cities to grow in a more organised way. These smaller cities are becoming places, for business and people are starting to want to live and work there. The government is calling these cities Tier-3 cities. Overall, the Budget provides stability, improves investor sentiment and lays the groundwork for balanced, sustainable growth across residential, commercial and infrastructure real estate segments.“ According to the Finance Minsiter there will be a strong emphasis on multimodal connectivity. A Coastal Cargo Promotion Scheme aims to increase the share of inland waterways and coastal shipping from the current 6 per cent to 12 per cent by 2047, improving logistics efficiency and lowering transportation costs. Additional initiatives include a Viability Gap Funding (VGF) scheme for seaplane operations, the development of new dedicated freight corridors connecting Dankuni in the east to Surat in the west, and the creation of 20 new National Waterways over the next five years.As per the budget, the government has proposed a seven high-speed rail corridors to act as growth connectors between major economic nodes. To support the expanding infrastructure ecosystem, the Budget also announces the establishment of training institutes as Regional Centres of Excellence, aimed at building a skilled workforce aligned with the sector’s long-term needs.