The affordability of homebuyers in India has improved significantly in the first half of 2025, thanks to the Reserve Bank of India’s (RBI) decision to slash the repo rate by 100 basis points. According to a report by Knight Frank India, the house purchase affordability index has shown a marked improvement, with most cities becoming more affordable for homebuyers. The report highlights that Ahmedabad is the most affordable housing market among the top eight cities, with a ratio of 18%, followed by Pune and Kolkata.
Mumbai, which has traditionally been one of the least affordable cities, has seen a significant improvement in its affordability index, with the ratio decreasing from 50% in 2024 to 48% in the first half of 2025. This is the first time that Mumbai’s affordability index has fallen below the 50% mark, which is considered the outer limit of affordability. The improvement in affordability can be attributed to the reduction in home loan rates, making it easier for homebuyers to purchase properties.
However, the National Capital Region (NCR) has seen a marginal decline in affordability, with households now needing to pay 28% of their income to acquire an average property, up from 27% in 2023. This is due to the steep increase in residential prices, which has overshadowed the impact of the interest rate cuts.
The Knight Frank Affordability Index is based on the Equated Monthly Instalment (EMI) to income ratio for an average household. The report suggests that as incomes grow and the economy gains strength, financial confidence among end-users improves, motivating them to invest in home ownership. With the RBI’s healthy GDP growth estimate for FY 2026 and a favourable interest rate scenario, affordability levels are expected to support homebuyer demand in 2025.
Overall, the report notes that affordability levels are now at their best since the pandemic and are significantly better than the levels seen at the end of 2024. The improvement in affordability is expected to boost the real estate sector, with homebuyers likely to take advantage of the favourable interest rate scenario and invest in properties.