Ahmedabad, Kolkata, Pune most affordable; Mumbai EMI ratio falls below 50%

Affordability drops marginally in NCR amid premium-led rise in weighted average prices

India’s housing affordability improved across seven of the top eight cities in 2025, powered by sharply lower home loan interest rates and steady income growth, according to Knight Frank India’s latest Affordability Index. The improvement comes after the Reserve Bank of India cut the repo rate by 125 bps since February 2025, reversing the affordability hit caused by the 250 bps rate hike cycle of 2022.

 

For the first time in recorded history, Mumbai—India’s most expensive real estate market—has breached the affordability threshold, with the EMI-to-income ratio falling to 47% in 2025, down from 50% last year and a steep decline from 93% in 2010.

 

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.

Assumptions:

•  EMI, housing unit size and price/ sq ft represent city-level averages.
• EMI:
•  Loan Tenure – 20 years
• Loan to Value – 80%
•  Home loan interest rate - Average home loan rates
•  Area of housing unit: House size is fixed for each city across the years but varies within different cities taking into account the average size preference for each city.

EMI to Household Income Chart 

   

Housing Price: Median housing price for that city

 

Across India, Ahmedabad (18%), Pune (22%), and Kolkata (22%) emerged as the most affordable markets, while NCR was the only city where affordability worsened, rising marginally from 27% to 28% due to a surge in premium-segment launches pushing up weighted average prices. 

Affordability Index of leading eight cities of India

Source: Knight Frank Research. Note: For H2 2025, affordability and income levels are calculated keeping all variables constant, except for the interest rate.

 

According to the Affordability Index, Ahmedabad is the most affordable housing market among the top eight cities, with a ratio of 18%.

 

In Mumbai, housing affordability has improved significantly, with the EMI-to- income ratio declining to 47%. This marks the first time in the city’s history that affordability hasfallen below the 50% threshold, signalling a new and more sustainable level of housing affordability. Knight Frank India’s Affordability Index, which measures the proportion of household income spent on EMIs, showed a consistent improvement across the eight 1 major Indian cities between 2010 and 2021. 

 

Affordability strengthened further during the pandemic as the Reserve Bank of India (RBI) lowered the policy repo rate to decade lows. However, in response to elevated inflation, the RBI increased the repo rate by 250 bps over a nine-month period beginning May 2022, which led to a temporary deterioration in affordability during 2022. 

 

"Rate stability from February 2023 onward supported a gradual recovery in affordability conditions. More recently, with economic growth remaining resilient and inflation easing materially, the RBI has reduced the repo rate by 125 bps since February 2025, resulting in a further improvement in affordability across most housing markets. This supportive rate environment has helped residential sales sustain close to the post- pandemic peak recorded in 2024. The supportive interest rate environment is likely to continue into 2026, underpinned by the Indian economy’s sustained and stable growth momentum," said Knight Frank in a report. 

 

City-Wise Highlights

•  Mumbai: Falls Below 50% for the First Time
• EMI/income ratio improves to 47%
• Driven by stable price growth, income gains and falling rates
• Marks a structural improvement in the world’s most expensive urban housing market

 

 NCR: Only Market Where Affordability Declines

 

EMI/income ratio worsens to 28%

Premium launches lift weighted average prices

Still far below the 50% stress threshold

 

Bengaluru & Hyderabad: Stable Buyer-Friendly Markets

 

Bengaluru: 27%, unchanged

Hyderabad: 30%, unchanged

Supported by sustained end-user demand and balanced price growth

 

 Ahmedabad, Pune, Kolkata: India’s Most Affordable

 

• Ahmedabad: 18%
• Pune & Kolkata: 22%
• Strong income traction, moderate price hikes, and cheaper loan rates drive the trend

 

2026 Outlook: Affordability to Stay Supportive

 

Knight Frank expects affordability conditions to remain favourable in 2026, supported by:

 

• RBI’s GDP forecast of 7.3% for FY2026
• A benign interest rate environment
• Continued income growth
• Stable residential demand momentum

 

“Income levels have been rising faster than housing prices, and combined with lower interest rates, affordability has strengthened across most cities,” said Shishir Baijal, Chairman & MD, Knight Frank India. “With GDP growth remaining strong and financing conditions supportive, affordability is likely to remain healthy in 2026.”