Over the past 15 years, India’s residential real estate market has witnessed a remarkable transformation. According to Colliers India, average affordability in major Tier I cities has improved significantly, driven by steady income growth, policy reforms, and an unprecedented expansion in housing credit. The Price-to-Income (P/I) ratio, a key measure of affordability, has nearly halved, from 88.5 in 2010 to 45.3 in 2025, making homeownership increasingly within reach for many urban Indians.
Incomes Grow Faster Than House Prices
At a national level, average incomes have grown at a compound annual growth rate (CAGR) of roughly 10%, while housing prices have risen at a slower pace of 5-7%. This divergence has boosted affordability across most major markets. Bank credit to the residential segment has surged more than tenfold in the same period, with the outstanding home loan book now exceeding INR 30 lakh crore as of October 2025.
“This sustained growth in credit deployment towards residential real estate reflects the segment’s resilience and demand momentum in the last few decades,” said Vimal Nadar, National Director and Head of Research, Colliers India. “Scheduled commercial banks have significantly increased their exposure to the housing sector, driven by strong demand fundamentals, improving average affordability levels and rising credit quality. Housing loans currently account for almost 17% of overall bank loans in the country, up from 10% in the early part of the previous decade. Overall, growing lender & institutional investor confidence, rising income levels, coupled with a strong policy push, can further improve affordability levels and boost home buying sentiment in the near-to-mid-term.”
Trends In Average Housing Price, Income And Affordability
Source: National Housing Bank (NHB), Industry, Colliers
The journey of India’s residential segment over the past decades has been shaped by numerous policy interventions and events, including the Pradhan Mantri Awas Yojana (PMAY), demonetization, the Real Estate (Regulation & Development) Act (RERA), the NBFC crisis, GST, and the Special Window for Affordable and Mid-Income Housing (SWAMIH). Despite these fluctuations, sales in major cities have remained robust, particularly in the post-pandemic era, reaching around 0.3-0.4 million units annually. Contributing factors include infrastructure development, rising incomes, favorable monetary policies, and improved transmission of repo rate changes.
“Housing sales across major Indian cities continue to remain strong, led by demand traction, favourable interest rates, and supported by a healthy increase in income levels over the last few years. While concerns over rising raw material costs continue to loom, pushing the prices upward, average income levels have increased at a higher rate compared to the average rise in property prices across most major markets. Looking ahead, steady growth in income levels coupled with likely softening of interest rates amidst low inflation, will continue to boost average housing affordability levels and support the residential market across major cities in the near-term,” said Badal Yagnik, Chief Executive Officer & Managing Director, Colliers India.
The improvement in affordability has not been uniform across cities or neighborhoods, however. City- and micro-level variations persist due to differences in demand-supply dynamics, project pricing, and the financial profiles of target buyers. Developers have adapted by offering a range of products at different price points to cater to India’s price-sensitive market, ensuring that demand is met across segments.
City-wise, Ahmedabad and Hyderabad stand out as some of the more affordable Tier I markets, while cities like Delhi NCR, Mumbai, and Chennai continue to have significant price gaps between central and peripheral areas. Nonetheless, as infrastructure projects expand and connectivity improves, these gaps are expected to narrow over time.
City-Wise Trends In Average Housing Affordability
The growth of peripheral locations has been particularly noteworthy. With office decentralization and the adoption of hybrid work models, demand is shifting to well-connected residential areas outside traditional Central Business Districts. This trend is supported by infrastructure projects that extend the reach of cities and make commuting easier. In cities like Ahmedabad, Bengaluru, and Hyderabad, the urban growth pattern is more balanced, resulting in a smaller price differential between central and fringe locations. In contrast, in cities such as Delhi NCR, Mumbai, and Chennai, peripheral property prices have risen sharply, though central areas remain considerably costlier.
Low interest rates, policy support, and regulatory reforms have further strengthened affordability. Post-pandemic, interest rates fell to historic lows, aiding residential growth across segments. While repo rates briefly increased due to inflationary pressures and external market volatility, the benchmark lending rate is now down to 5.5%. Coupled with low inflation, this creates room for further rate reductions, likely boosting homebuyer sentiment, especially in the affordable and middle-income segments. The recent rationalization of GST on key construction materials also adds to this positive outlook.
As residential credit has expanded, the share of housing loans in total bank lending has climbed from about 10% in 2010 to nearly 17% in 2025. This growth demonstrates lenders’ confidence in the market’s resilience, even amid periodic disruptions, and reflects the sustained demand for housing across urban India.
With incomes rising faster than property prices, improved access to credit, and supportive policies, housing affordability in India’s Tier I cities is poised to remain strong in the near term. As infrastructure projects continue to expand city limits and peripheral neighbourhoods attract more buyers, the residential market is likely to see sustained demand, bridging the gap between central and fringe locations.
What has been a long and sometimes volatile journey for Indian residential real estate is now showing clear signs of stability. Higher incomes, supportive credit, and evolving city landscapes are combining to make homeownership a more realistic goal for urban Indians, reinforcing confidence in the residential sector for years to come.
