Slump in the residential real estate sector in tier-1 cities seems to have spread over to tier-2 and tier-3 cities. Housing demand in small cities got down by 25% during February-July this year because of higher cost of borrowing. Besides rising cost, unavailability of inputs and power shortage also cause excessive delays in project completion.

The study by the Assocham said that realty transaction has gone down by nearly 25% in most of tier-2 and tier-3 cities between February and July of current financial year.

Assocham secretary general D.S. Rawat said that Approx fifteen million people in tier-2 and tier-3 cities were unable to make purchases as higher inflation and interest rate have dampened their enthusiasm and eroded their budget.

The Assocham study is based on feedback from affiliated real estate majors like Parsvnath, Omaxe, DLF, Unitech, and BPTP, which are developing projects in small towns.