It ~might~ be the first game to have their main city like that, yeah. Pretty sure it's note the first thing ever to bring in that idea though, there are undoubtedly movies/anime/books that had this concept decades before FF7.
PSN ID: RyuuHou24 "I never said that....and even if I said it, I never said it" - Dr Peter Venkman RGB
Chrono Trigger would be the first game since Zeal had the people on the ground and the magic users lived above in the sky. It's the same concept and everything just different execution. Though, if you've ever read a book you'll know that Final Fantasy VII didn't creatively come up with the idea. There are many books that describe a city just like Midgar and even in one, that I can't remember, part of the city falls onto the lower city.