For prospective homebuyers across India's major urban centers, 2025 presents a complex picture. While lower financing costs and rising incomes have made purchasing a property relatively more accessible on paper, this improvement is uneven and heavily skewed towards the premium end of the market, leaving budget-conscious buyers with fewer options.
What's Driving the Affordability Shift?
According to the latest Affordability Index from property advisory firm Knight Frank India, the proportion of household income needed to service equated monthly instalments (EMIs) has shown consistent improvement across the top eight cities since 2010. This positive trend is primarily fueled by two of the three key factors that influence affordability: rising income levels and reduced home loan interest rates.
The Reserve Bank of India's monetary policy has played a crucial role. Earlier in December 2025, the central bank cut the repo rate by 25 basis points to 5.25%, marking a cumulative reduction of 125 basis points for the year. While a single cut acts as a sentiment booster, consecutive reductions create a supportive financing environment, particularly benefiting the affordable and mid-income housing segments which are highly sensitive to borrowing costs.
A City-Wise Breakdown of the Market
The improvement is not uniform across the country. Ahmedabad retains its position as the most affordable housing market among major cities, with an EMI-to-income ratio of just 18%. It is closely followed by both Pune and Kolkata, each with a ratio of 22%.
Even Mumbai, known for its ultra-luxury ₹100 crore apartment deals, has seen its affordability level improve since the pandemic, with the ratio declining to 47% in 2025. This is attributed to stable business and income growth, reasonable price increases, and an enabling loan environment.
In stark contrast, the National Capital Region (NCR) was the sole major market to register a decline in affordability this year. This was driven by a sharp rise in weighted average prices, fueled by heightened activity in the premium housing segment.
The Premium Boom and the Affordable Lag
This brings us to the central paradox of the current market. Demand for premium and luxury homes, coupled with rising construction costs, has significantly driven up prices. Data from Anarock Property Consultants reveals that homes priced at ₹1.5 crore and above saw an average price appreciation of 40% between 2022 and 2025, with Delhi-NCR leading at a staggering 72% rise.
Meanwhile, the affordable housing segment continues to struggle. Despite a 26% average price growth over three years, it faces lacklustre demand and supply. Developers, especially large listed ones, are overwhelmingly focusing on premium projects that sell faster and guarantee better profit margins, often to meet ambitious sales targets.
So, is buying a home really more affordable? The answer is nuanced. For those in the market for mid-to-premium homes in cities like Mumbai, Pune, or Ahmedabad, the combination of higher incomes and cheaper loans has improved the equation. However, for the budget homebuyer, the market offers shrinking choices. True affordability will only materialize broadly if the supply of reasonably priced homes increases alongside the positive trends in income and interest rates.
