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Tata Capital > Blog > Loan for Home > Tier 1 vs Tier 2 – Which is better for buying a home?

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Tier 1 vs Tier 2 – Which is better for buying a home?

Tier 1 vs Tier 2 – Which is better for buying a home?

Are you looking to buy a new home soon? Perhaps you're struggling to choose between a tier 1 and tier 2 city? If you answered yes to both these questions, this article is for you.

Buying a house is a significant financial commitment that is critical in shaping your life from here on. While tier 1 cities have been the popular choice for homebuyers till the past decade, this trend is slowly changing. Especially now, with so many options available and lenders offering loans on flexible home loan eligibility terms, you can easily afford a home in any city you want.

But first, let us get down to the basics.

What are tier 1 and tier 2 cities?

Indian states are generally classified as tier 1, tier 2 and tier 3 based on their population density. At present, there are 8 metropolitan or tier 1 cities: Delhi, Mumbai, Chennai, Bangalore, Kolkata, Hyderabad, Pune, and Ahmedabad. These cities are densely populated and have higher living expenses, facilities, industries, education, etc.

On the contrary, 104 cities are classified as tier 2 cities and the remaining fall under the tier 3 category.

Additional Read: What are the Different Tiers in Real Estate?

Tier 1 vs tier 2: which is better?

Here are a few parameters that will make it easier for you to decide between a tier 1 or tier 2 city.


The property rates are less in tier 2 cities than the metros, making them a more convenient option if you are low on budget. However, you can get competitive home loan interest rates in tier 1 cities to purchase your desired house.

Modern amenities

Many home buyers believe that smaller cities lack the modern facilities offered by tier 1 cities. Well, that is not true. Many tier 2 cities today have excellent healthcare and education facilities, which is why an influx of population is moving to these cities.

Cost of living

If you are looking for a place with a low cost of living, tier 2 cities might be the better choice. You’ll be surprised to know that these cities are way more affordable than the metros and you can enjoy a good standard of living here.

Growing job opportunities

If you are hesitant to move to any tier 2 city because there might not be enough professional opportunities – think again! Many big organisations, enterprises and startups are setting up branches in tier 2 cities due to the low property rates and other benefits.

Besides the factors mentioned above, accessible home finance is also a critical point to consider. Luckily, housing loans are now easily available in every city, whether you choose to settle down in a metropolitan or a Tier 2 city.

Additional Read: Top Reasons Why Tier-2 Cities Are Worth the Investment

Over to you

In a nutshell, both tier 1 and tier 2 cities have their share of merits and downsides. So, it’s best to do some homework before making your decision. Compare the cities based on the above parameters and your financial goals. And when you are sure where you wish to buy your next abode, you can apply for a home loan with Tata Capital!

We only ask for minimal paperwork and provide a seamless online application facility. Use our home loan EMI calculator here and start planning today!

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