Ahmedabad and Pune Lead India’s Most Affordable Housing Markets in 2025: Knight Frank Report
Lower home loan interest rates have significantly improved housing affordability across India’s major cities in 2025, offering relief to homebuyers and supporting sustained residential demand, according to Knight Frank India’s latest Affordability Index.
The report highlights that affordability improved in seven of the top eight cities, led by Ahmedabad, which emerged as the most affordable housing market with an EMI-to-income ratio of 18%, followed by Pune and Kolkata at 22% each. A lower ratio indicates that households spend a smaller proportion of their income on home loan EMIs, making housing more affordable.
A key milestone was recorded in Mumbai, where housing affordability improved meaningfully, with the EMI-to-income ratio declining to 47%. This marks the first time in the city’s history that affordability has fallen below the critical 50% threshold, a level beyond which banks typically become cautious in underwriting home loans. Knight Frank India noted that this signals a more sustainable affordability environment for India’s most expensive residential market.
The improvement in affordability comes after a volatile interest-rate cycle over the past few years. While affordability strengthened between 2010 and 2021 and further improved during the pandemic due to ultra-low interest rates, it temporarily weakened in 2022 following a sharp 250 basis point hike in the RBI’s repo rate to combat inflation. Stability in rates from early 2023, followed by a cumulative 125 bps repo rate cut since February 2025, has once again tilted conditions in favor of homebuyers.
Knight Frank India observed that this supportive rate environment has helped residential sales remain close to the post-pandemic peak seen in 2024, with momentum expected to carry into 2026, supported by resilient economic growth and easing inflation.
Among other cities, Bengaluru and Hyderabad saw affordability levels remain stable in 2025, as improvements in income and demand were matched by a rise in housing prices. Chennai also witnessed better affordability, with its EMI-to-income ratio improving to 23%. NCR, however, was the only market to see a marginal deterioration in affordability, driven by a premium-led rise in weighted average prices. Despite this, affordability levels in NCR remain well within comfortable limits and significantly better than the stress threshold of 50%.
Commenting on the findings, Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India, said that supportive affordability is crucial for sustaining homebuyer demand and overall economic momentum. He noted that income growth has outpaced price increases in recent years, and when combined with declining interest rates, has strengthened home affordability across markets.
With the RBI projecting 7.3% GDP growth for FY26 and a benign interest-rate outlook, affordability levels are expected to remain supportive of housing demand in 2026 as well. Knight Frank India added that while concerns around overheating and price corrections emerged at the start of 2025, residential sales activity has remained resilient, indicating that improved affordability continues to anchor buyer confidence in the housing market.
