Every country has their concept of identifying the location and the development, infrastructure, population and education of the people who live in that particular location. Perceiving which part of the country is growing or not is most important for the growth of the country. In India, Cities are classified into 4 types, Tier 1, 2 3 and 4. This will be used to establish taxes and to put various social and economic plans into action. In this classification, we can know which cities are the fastest growing and emerging in India. This classification also helps to identify which part of the country has scope for business and infrastructure.

How are cities classified in India?

Under the suggestion of the Seventh Central Pay Commission, all the cities of India are classified into 3 categories:

X cities: In this classification all the cities are A1 cities, generally known as Tier 1 cities. These cities are the best for live and work in India.

Y cities: In this classification all the cities are A, B1 and B2 cities, generally known as Tier 2 cities.

Z cities: In this classification all the C and unclassified cities are in this generally known as Tier 3 and Tier 4.

This classification is mainly used by the government of India to pay House Rent Allowance (HRA) to their employees.

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What is Tier?

Before 2008, the city was classified into 2 categories in India called a Historical classification, which was before the recommendations of the Sixth Pay Commission. But now, cities are classified according to their population, education, development and infrastructure. According to Indian Government, cities are classified into Tiers 1, 2, 3 and 4 based on this factor. Programs to improve social and economic conditions are implemented as well as taxation. Cities such as Mumbai, Pune, Kolkata, Ahmedabad, and others were classified as A1 cities in this category. 

In India, how are cities divided into Tiers?

What is a Tier 1 city in India?

tier 1 cities in India refer to those cities which are the major hubs for business, politics and culture. These cities have a large population, good infrastructure, strong economic base, high standards of living and well-developed healthcare systems as well as being responsible for producing the majority of India’s GDP.

The cities are located in populous and economically advanced regions and include the likes of Delhi, Mumbai, Chennai, Bangalore, Hyderabad, and Kolkata. In addition, these cities are often the most visited by international tourists and are home to some of the country’s best educational institutions and the best cities to live and work in India. Tier 1 cities are therefore considered the most desirable places to work and live in India.

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What is a Tier 2 city in India?

tier 2 cities in India refer to cities that are identified as a part of the Smart Cities Mission, an initiative launched by the Government of India in 2015. The mission aims to promote sustainable and inclusive development in urban areas by developing smart cities to improve the quality of life for citizens.

They are the most populous cities in India and have a leading share of economic activities like employment, investment, trade, research, education and so on. tier 2 cities are the symbol of India’s development and progress. They have a major role in India’s growth story and continue to be the most preferred destination for many people. 

What is a Tier 3 city in India?

Tier 3 cities in India refer to the smaller cities which have recently experienced significant population and economic growth. These cities have become vital contributors to India’s economy, but aren’t as well-known or developed as their tier 1 and 2 counterparts. These cities are less developed than their tier 1 and tier 2 counterparts and have lower income levels, fewer job opportunities, and fewer educational and health facilities. The government of India categorizes these cities as ‘Tier 3’ to provide them with targeted aid and development plans.

Tier 3 cities tend to have larger populations, more employment opportunities, and increased investment, and are seen as more attractive places to live, work, and do business. They have become hubs for businesses, with many companies choosing to set up bases here for their operations. This has led to a rise in demand for goods and services, creating more jobs and driving economic development.

What is a Tier 4 city in India?

A Tier 4 city in India is defined as a city with a population between 10,000 to 19,999. These cities are located in remote and rural areas and are typically not well connected to other parts of the country or the world. They have limited access to resources, infrastructure and other services and are typically low on economic development.

These cities, however, have huge potential for growth and development, if they are given the right support and intervention. With careful and strategic planning and investment, these cities can be transformed into major hubs of economic activity and help bridge the gap between urban and rural India. Tier 4 cities offer huge opportunities for businesses and investors, as they often have large untapped markets and unexploited potential. 

Because of the high opportunity, real estate investment in this location is the best option if you are looking for the safest investment option. But sometimes budget is also a main problem that holds us to investing in real estate. But don’t worry we are here to help you with the Home Loan service with the best interest rates.

List of Tier 1, 2, 3, and 4 cities in India

The classifications of Indian cities and their tiers

Classification of the cities helps to understand the potential of the different cities in the county. Tier 1 cities are the ones which are the best cities in India, where lifestyle is the most expensive and luxurious. The satellite cities of these Tier 1 cities also give almost the same facility and lifestyle to the citizens. On the other hand Tier 2 cities are developing cities specially these cities are part of the Smart City mission cities. Tier 3 & 4 are the ones which are still not grown up because of the shortfall of government facilities.

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