Lower home loan rates improve affordability in 7 of 8 cities: Knight Frank

Knight Frank's Affordability Index shows lower home loan rates improved affordability in seven of eight top cities in 2025, with Mumbai's EMI stress falling below 50 per cent

Real estate developers expect improved housing affordability to support sales momentum across major Indian cities, aided by lower home loan rates following RBI repo rate cuts. According to Knight Frank India’s Affordability Index, affordability improved in seven of eight top cities in 2025, even as residential sales (for 9M 2025) dipped marginally year-on-year.

 

Which cities are most affordable and what changed for Mumbai and NCR? 

Ahmedabad remains the most affordable market, followed by Pune and Kolkata, while Mumbai saw a notable improvement, breaching the 50 per cent stress threshold for the first time. The National Capital Region (NCR) was the only market to see a slight decline in affordability due to premium-led price rises. Developers said easing rates, rising incomes and stable macro conditions are sustaining demand, with affordability expected to remain supportive into 2026.

 

How does Knight Frank measure housing affordability? 

Knight Frank noted that, over the past few years, both weighted average prices and income levels have risen, even as home loan interest rates have followed the repo rate trajectory, which has declined 125 basis points (bps) this year. The index measures the proportion of household income spent on equated monthly instalments (Emis).

 

Pointers

• Homebuyer affordability improved in seven of eight major cities in 2025 due to lower interest rates.
• Ahmedabad is the most affordable market at 18 per cent, followed by Pune and Kolkata at 22 per cent.
• Mumbai’s Emi-to-income ratio fell to 47 per cent, breaching the 50 per cent threshold for the first time.
• NCR was the only market to see a marginal decline in affordability due to premium-led price rises.
• Affordability improved steadily between 2010 and 2021 on falling rates.
• The Reserve Bank of India’s 250 bps rate hikes in 2022 temporarily weakened affordability.
• Rate stability since February 2023 aided recovery.
• A 125 bps repo rate cut since February 2025 further boosted affordability.
• Knight Frank expects supportive affordability to continue into 2026.