Ahmedabad, Pune, and Kolkata lead in housing affordability; Mumbai improves, NCR slips
Ahmedabad leads with an affordability ratio of 18%, followed by Pune at 22% and Kolkata at 23%. Mumbai remains the least affordable market with a ratio of 48%, though notably, it has dropped below the 50% threshold for the first time in the history of the index.
In Mumbai, the affordability index improved by over 2 percentage points, from 50% in 2024 to 48% in H1 2025, marking the first time the city has dipped below the 50% threshold, which is considered the upper limit of affordability. Traditionally above this benchmark, Mumbai's market has become relatively more affordable due to lower home loan interest rates, the report said. NCR's affordability levels decline due to increase in housing prices
In contrast, affordability levels in the National Capital Region (NCR) have slightly worsened, with households now needing to spend 28% of their income to buy an average home, up from 27% in 2023. This decline in affordability is attributed to a sharp rise in residential prices, which has offset the benefits of recent interest rate cuts, the report said.
Knight Frank India's Affordability Index, which tracks the EMI (Equated Monthly Instalment) to income ratio for an average household, witnessed steady improvement from 2010 to 2021 across the eight leading cities of India especially during the pandemic when the Reserve Bank of India (RBI) cut policy repo rate (REPO) to decadal lows, the report noted.
The central bank subsequently raised the REPO rate by 250 bps in a space of nine months starting May 2022 to address high inflation which caused stress on affordability levels. However, with inflation worries subsiding and economic growth regaining focus, the RBI slashed the REPO rate by 100 bps since February 2025. This has improved affordability across 7 of the 8 cities in H1 2025.
The Knight Frank Affordability Index indicates the proportion of income that a household requires, to fund the monthly instalment (EMI) of a housing unit in a particular city.
So, a Knight Frank Affordability index level of 40% for a city implies that on an average, households in that city need to spend 40% of their income to fund the EMI of housing loan for that unit. An EMI/ Income ratio over 50% is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage.
Also Read: Housing sales drop by 19% across nine cities, and supply dips by 30%.; Mumbai sees steepest decline: Report
"Affordability plays a critical role in maintaining homebuyer demand and sustaining sales momentum, both of which are vital contributors to the broader economy. As incomes grow and the economy gains strength, financial confidence among end-users improves, motivating them to commit to long-term investments such as home ownership. Given the RBI's healthy 6.5% GDP growth estimate for FY 2026 and a favourable interest rate scenario, affordability levels are expected to be supportive of homebuyer demand in 2025,' said Shishir Baijal, chairman and managing director, Knight Frank India.
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