Has House Purchase Affordability Improved Across India’s Major Cities?
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Synopsis
A recent report reveals a remarkable improvement in house purchase affordability across India's major cities in 2025. With Ahmedabad leading the Affordability Index, the article delves into the factors contributing to this positive trend and the implications for homebuyers.
Key Takeaways
- Ahmedabad is the most affordable city for home purchases in 2025.
- Mumbai has improved its affordability with an EMI-to-income ratio below 50%.
- A 125 basis-point cut in the policy repo rate has enhanced affordability.
- Resilient economic growth and rising incomes are key factors.
- The NCR saw a decline in affordability due to rising prices.
New Delhi, Dec 23 (NationPress) The affordability of purchasing a home has seen a substantial improvement across leading cities in India as of 2025, with Ahmedabad emerging as the most cost-effective option among the top eight cities, according to a recent report.
This analysis from property consultancy Knight Frank India reveals that Ahmedabad stands at the forefront of the Affordability Index with an EMI-to-income ratio of 18%, followed closely by Pune and Kolkata at 22%.
In Mumbai, the EMI-to-income ratio has decreased to 47%, which is a significant milestone as it is the first instance where the city's affordability has dipped below the 50% mark, indicating a more sustainable level of housing affordability.
The consultancy credits this positive shift to a 125 basis-point reduction in the policy repo rate since February 2025, which has enhanced affordability, alongside robust economic growth, diminishing inflation, and rising income levels.
A stable business environment and consistent income growth, paired with moderate price increases and a more accessible financing landscape, have been pivotal in improving affordability in Mumbai.
Conversely, the National Capital Region (NCR) was the sole major market to experience a decline in affordability this year, primarily due to a significant surge in weighted average prices, fueled by increased activity in the premium segment of the market.
Affordability had seen a boost across India during the pandemic as the Reserve Bank of India (RBI) slashed the policy repo rate to its lowest in a decade, as noted in the report.
This favorable rate environment has allowed residential sales to maintain levels close to the post-pandemic peak observed in 2024. It is anticipated that this supportive interest rate environment will persist into 2026, bolstered by the ongoing stable growth of the Indian economy, the report forecasts.
“Sustaining supportive affordability is crucial for maintaining homebuyer demand and sales momentum, which are vital economic drivers for the country,” stated Shishir Baijal, International Partner, Chairman, and Managing Director of Knight Frank India.
Over recent years, both weighted average prices and income levels have escalated at a quicker pace, and the combination of decreasing interest rates has enhanced overall home affordability, he concluded.
Point of View
It’s evident that the recent improvements in housing affordability across many Indian cities indicate a positive trend for homebuyers. With economic factors aligning to create a more favorable market, it is essential for stakeholders to remain vigilant and responsive to these changes. The ability of cities like Ahmedabad and Mumbai to adapt to consumer needs while maintaining affordability is crucial for long-term stability in the housing sector.
NationPress
23/12/2025
Frequently Asked Questions
Which city is the most affordable for home purchases in India?
Ahmedabad is currently the most affordable city for home purchases in India, with an EMI-to-income ratio of 18%.
What improvements have been made in Mumbai's housing affordability?
Mumbai's EMI-to-income ratio has decreased to 47%, marking a significant improvement and the first time it has fallen below 50%.
What factors contributed to the improvement in housing affordability?
The improvement is attributed to a 125 basis-point cut in the policy repo rate, resilient economic growth, easing inflation, and rising incomes.
Which area in India experienced a decline in affordability?
The National Capital Region (NCR) was the only major area to see a decline in affordability due to rising weighted average prices.
What is the projected trend for housing affordability in the near future?
Experts predict that the supportive interest rate environment will continue into 2026, fostering sustained homebuyer demand.
