Shift to small cities, digital applications: Tier 2 and Tier 3 cities account for 64% of home-loan volumes: Report
A recent industry report indicates that smaller cities are becoming the primary drivers of India's home loan growth. In 2025, Tier 2 and Tier 3 cities collectively accounted for 64% of the total home-loan volumes. This shift is significantly bolstered by the increasing adoption of digital lending applications, which are improving access and efficiency in these markets.
What this means
This trend signals a geographical diversification of credit demand and new growth opportunities for banks, particularly those with strong digital infrastructure and a presence in semi-urban and rural markets. Lenders should recalibrate their retail lending strategies, focusing on expanding their reach and digital capabilities in these emerging markets to capitalize on the sustained demand for housing finance.
Most affected: Retail lending, Housing finance, Digital banking
Key takeaway: Prioritize digital lending infrastructure and expansion strategies for home loan portfolios in Tier 2 and Tier 3 cities to capture significant growth.
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