Homebuyer affordability across India’s major cities has improved significantly in 2025, according to Knight Frank India’s latest Affordability Index, which tracks the proportion of household income spent on home loan EMIs. The report highlights that declining interest rates, steady income growth, and resilient economic conditions have strengthened the ability of homebuyers to purchase properties, sustaining robust residential sales momentum.
Ahmedabad emerged as the most affordable housing market among the top eight cities, with an EMI-to-income ratio of just 18%, followed closely by Pune and Kolkata at 22%. Mumbai, historically one of India’s least affordable markets, crossed a significant milestone this year, with the EMI-to-income ratio dropping to 47%—the first time the city has fallen below the 50% threshold. This marks a new level of affordability, providing a boost to homebuyer confidence and potential market activity.
According to Shishir Baijal, International Partner, Chairman, and Managing Director, Knight Frank India, supportive affordability is a crucial driver for sustaining homebuyer demand and economic growth.
“Over the past few years, both weighted average property prices and income levels have risen, while home loan interest rates have closely followed the trajectory of the repo rate, which fell by 125 basis points this year. Rising incomes, combined with easing interest rates, have strengthened overall home affordability. This has reinforced financial confidence among end-users, encouraging longer-term commitments toward asset creation,” Baijal said.
The report traces affordability trends over the past decade, noting consistent improvements across the eight major cities between 2010 and 2021. The COVID-19 pandemic accelerated a recalibration of property prices and lending rates, which significantly boosted demand. This post-pandemic momentum has persisted through 2025, supported by effective inflation control, steady economic growth, and a favorable lending environment. Residential sales have remained close to post-pandemic highs seen in 2024, with no major disruptions expected through year-end.
Interest rate movements have played a pivotal role in affordability trends. Following the pandemic, the Reserve Bank of India (RBI) lowered the policy repo rate to decade-low levels, which initially improved affordability. In 2022, inflationary pressures prompted a 250-basis-point increase over nine months, temporarily weakening affordability. However, rate stability from February 2023, followed by a 125-basis-point reduction since February 2025, has contributed to a marked improvement in homebuyer capacity to service loans. This supportive interest rate environment is expected to continue into 2026, backed by India’s strong economic growth and steady inflation outlook.
While most cities have seen improvements, affordability trends have varied. Mumbai’s milestone of crossing below the 50% EMI-to-income threshold reflects a balance of reasonable price growth, steady income increases, and accessible financing. In contrast, the National Capital Region (NCR) experienced a slight deterioration in affordability due to rising property prices at the premium end, although overall levels remain within safe limits. Bengaluru and Hyderabad maintained stable affordability, with both demand and average property values increasing in tandem, keeping these markets buyer-friendly.
Knight Frank’s report highlights that a supportive affordability environment is critical for sustaining demand and market stability. Rising household incomes, coupled with low interest rates, have not only reinforced homebuyer confidence but also enabled the residential market to accommodate both first-time buyers and investors seeking longer-term asset creation. The report underscores that as India’s economy continues to grow, the combination of stable financing conditions and income growth will likely support homebuyer demand in 2026 and beyond.
Looking ahead, cities with strong infrastructure, connectivity, and emerging micro-markets are expected to benefit from continued affordability improvements. Homebuyers are increasingly considering lifestyle, convenience, and long-term value alongside pricing, and developers are responding with a mix of premium, mid-segment, and affordable housing options. With the RBI projecting robust GDP growth of 7.3% for FY26, and a benign interest rate outlook, Knight Frank expects housing affordability to remain supportive of sustained residential demand in the coming year.
As India’s real estate market continues to mature post-pandemic, affordability will remain a key determinant for market activity. The improved conditions across top cities, especially historic milestones in Mumbai, indicate a more accessible and sustainable residential market landscape. This environment is likely to encourage developers to expand supply, while buyers feel increasingly confident about making significant long-term investments in property.
The year 2025 has been a year of improved housing affordability, driven by falling interest rates, rising incomes, and resilient economic conditions. While some regional differences persist, the overall outlook for homebuyer accessibility remains positive, providing a strong foundation for continued residential demand into 2026.
