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Every three claimed regions, you get a potential town upgrade (you cannot upgrade all villages). Villages must have 6 buildings constructed for them to be a valid upgrade target. Once you have three towns, you can upgrade your capital to a City, which requires that you have 12 buildings constructed.
On top of that, you also didn't mention the two highly important buildings in the Mage Tower (requires Town) and Teleportation Circle (requires Rank 3 Arcane). They let you teleport between towns that have them, which saves a lot of time in the lategame as you move between places.