Infrastructure expansion expected to boost Tier-2 cities

Large-scale infrastructure expansion across India is expected to accelerate economic activity in Tier-2 and Tier-3 cities, as improved connectivity and industrial investment reshape development beyond the country’s largest metropolitan centres.

Government investment in highways, airports, logistics hubs and industrial corridors has increased significantly in recent years. Public capital expenditure has risen from Rs 2 lakh crore in 2014-15 to Rs 11.2 lakh crore in 2025-26, with the Union Budget 2026-27 raising the allocation further to Rs 12.2 lakh crore.

The government has also increased its focus on smaller urban centres, identifying Tier-2 and Tier-3 cities as important growth centres requiring improved infrastructure and modern urban facilities, reported The Economic Times.

Recent policy announcements have included plans to develop City Economic Regions (CERs) centred around several Tier-2 cities and temple towns. These regions are expected to receive up to Rs 5,000 crore over five years to support infrastructure, connectivity and economic development projects.

Experts say these investments are likely to reshape the economic landscape of emerging cities by improving connectivity with major economic corridors and creating new opportunities for industrial and residential development.

Transport infrastructure projects such as expressways, metro systems, freight corridors and regional airports are expected to improve access to markets and reduce travel times between smaller cities and major economic hubs.

Improved connectivity is also expected to support the development of industrial clusters, logistics parks and commercial hubs in these regions.

According to a recent real estate market analysis, land prices in several Tier-2 and Tier-3 cities could rise by 25 to 100 per cent over the next two to four years as infrastructure development and investment activity increase.

Cities such as Bhubaneswar, Cuttack, Puri and Visakhapatnam are among those expected to see stronger development activity as new infrastructure projects improve connectivity and economic opportunities, reported Hindustan Times.

Industry analysts say improved infrastructure is gradually shifting economic activity away from metropolitan centres, encouraging businesses to expand operations in smaller cities where land costs remain lower and development potential remains high.

The expansion of airports, highways, industrial corridors and logistics networks is expected to strengthen regional supply chains and attract new industries to these cities.

As infrastructure investment continues to expand, Tier-2 and Tier-3 urban centres are increasingly being seen as the next phase of India’s urban growth, supported by improved connectivity, rising investment and expanding economic activity.