Since you have had a good experience with your Honda Hornet, you could stick with the same brand and step up to any of the Honda CB350 models. All are mechanically very similar, and picking between the three comes down largely to which one you prefer the look of, as well as pricing. All three are comfortable, torquey, well-finished and decently fuel-efficient machines. 

If you want to switch things up, Royal Enfield has three 350cc machines which deserve your attention - Hunter, Bullet and Classic. The Hunter is the lightest and most agile machine of these three and will feel the smallest, too. 

The Bullet and Classic are considerably heavier and have commanding riding positions and great suspension. 

A test ride of all these 350s should help you decide which is the best option for you. 

Since almost all of your usage is going to be in the city, going for the Royal Enfield Classic 650 doesn't make sense because its rear suspension is quite stiff, and in traffic, its 243kg kerb weight will be a task to deal with, especially considering the way the engine will splay your legs out. You are right to worry about fuel efficiency because the 648cc twin is not very fuel efficient at slow city speeds, especially considering the bike's 243kg kerb weight. 

The Classic 350 is a lovely bike to use inside the city with its upright ergonomics, plush suspension and torquey, soulful engine. The Goan Classic is also something you can take a look at if you like its custom bike look, although it does trade off a little bit of practicality and comfort to the Classic.