Mint Explainer | Cheaper loans, rising prices—is buying a home really affordable?

According to property advisory Knight Frank India’s latest affordability index, Ahmedabad remains the most affordable housing market among major cities, followed by Pune and Kolkata.

Mint breaks down what’s driving this improvement and why affordability is still under pressure.

Has affordability really improved?

India’s residential real estate market continues to see strong demand. Despite housing prices being on the rise, certain cities, including Mumbai, the country’s most valuable property market, are seeing improving homebuyer affordability.

Knight Frank’s Affordability Index, which measures the proportion of household income spent on equated monthly instalments (EMIs), shows a consistent improvement across the top eight cities since 2010.

Affordability is influenced by three key factors: weighted average prices, income levels and home loan interest rates. Improved income levels and reduced interest rates have strengthened overall home affordability.

Will RBI’s repo rate cut help?

Earlier this month, the Reserve Bank of India cut the repo rate by 25 basis points to 5.25%. The move takes the cumulative reduction in repo rate to 125 basis points this year.

A 25 basis point reduction is seen as a sentiment booster, especially for first-time home buyers, but consecutive rate cuts reinforce a supportive financing environment and could strengthen sales momentum in an already upbeat residential sector.

Affordable and mid-income housing segments typically benefit the most due to their higher sensitivity to borrowing costs.

Which cities are more affordable?

Mumbai may continue to make headlines with its ₹100 crore apartment deals, but housing affordability in the city has relatively improved. The EMI-to-income ratio declining to 47% in 2025 means the affordability level in Mumbai has improved since the pandemic.

A stable business and income growth environment, coupled with reasonable price growth and an enabling financing environment, were the major factors behind this. Similarly, Ahmedabad is the most affordable among the top eight cities, with a ratio of 18%, followed by both Pune and Kolkata at 22%.

In contrast, the National Capital Region (NCR) was the only major market to register a decline in affordability during the year, driven by a sharp rise in weighted average prices due to heightened activity at the premium end of the market.

Are rising home prices a concern?

The demand for premium and luxury homes, along with rising input and construction costs, has also driven up prices in recent years.

Homes priced at ₹1.5 crore and above saw an average price appreciation of 40% between 2022 and 2025. The Delhi-NCR region saw the sharpest price rise in this category of homes, at around 72%, according to a recent Anarock Property Consultants report. In fact, mid-income and premium homes priced between ₹40 lakh and ₹1.5 crore saw a good 39% rise.

Property analysts said if residential units are selling even at increased prices, and there is no major unsold inventory pile-up, then the overall market looks fairly healthy.

What about affordable housing?

Despite overall improvements in affordability metrics, the affordable housing segment continues to lag. The category experienced a 26% average price growth over the last three years, amid lacklustre demand and supply.

Developers are largely focusing on premium homes, leaving budget homes out in the cold. This trend is expected to continue in 2026 as well.

Large, listed developers are rushing to meet ambitious sales targets, which can only be achieved through premium housing that sells faster and assures better profit margins.

So, while the affordability of homebuyers may improve next year due to rising incomes and better loan rates, it will only make a real difference if the market offers more choices for buying homes on a budget.