India's Most Affordable City for Homebuyers in 2025: Discover the Top Markets
Ahmedabad, Pune, and Kolkata lead India's most affordable cities for homebuyers in 2025, with Mumbai entering the affordability range for the first time. Discover the key factors driving this trend.
Housing AffordabilityReal EstateRbi PoliciesHome LoansIndian CitiesReal Estate PuneJun 25, 2025
Ahmedabad leads the affordability rankings with an index ratio of just 18%, indicating that households spend only that fraction of their income on home loan EMIs. Pune follows at 22% and Kolkata at 23%, making them the top three most affordable metros in India for housing. The index considers a 40% threshold as the limit of affordability, meaning, the lower the percentage, the more affordable the market.
In a landmark development, Mumbai’s affordability index dropped below the 50% mark for the first time since the index’s inception. The index fell from 50% in 2024 to 48% in H1 2025, signifying the city’s most affordable period in recent history. This shift is credited to reduced home loan rates that have made monthly repayments slightly more manageable in the country’s most expensive housing market.
Conversely, the National Capital Region (NCR) saw a marginal decline in affordability. Households in NCR now allocate 28% of their income towards housing, up slightly from previous figures due to rising residential prices, despite interest rate relief.
“Affordability plays a critical role in maintaining homebuyer demand and sustaining sales momentum, both of which are vital contributors to the broader economy,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India. He added, “As incomes grow and the economy gains strength, financial confidence among end-users improves, motivating them to commit to long-term investments such as home ownership. Given the RBI’s healthy 6.5% GDP growth estimate for FY 2026 and a favourable interest rate scenario, affordability levels are expected to be supportive of homebuyer demand in 2025.”
The RBI’s recent policies—including its neutral stance on rates and a reduction in the Cash Reserve Ratio (CRR)—have also injected greater liquidity into the system. These measures have lowered the cost of borrowing and unlocked substantial funds for lending, directly benefiting homebuyers and developers alike.
This improved affordability is further bolstered by a favourable macroeconomic environment, with controlled inflation, improving wage levels, and steady GDP growth. As a result, the Indian housing sector is witnessing a resurgence, and current affordability levels are among the best observed since the post-pandemic period.
Frequently Asked Questions
Which city is the most affordable for homebuyers in India in 2025?
Ahmedabad is the most affordable city for homebuyers in India in 2025, with an affordability index ratio of just 18%, followed by Pune and Kolkata.
What factors have contributed to improved housing affordability in India?
The Reserve Bank of India’s (RBI) 100 basis point cut in the repo rate, controlled inflation, improving wage levels, and steady GDP growth have contributed to improved housing affordability in India.
How has Mumbai's affordability index changed in 2025?
Mumbai’s affordability index dropped below the 50% mark for the first time since the index’s inception, falling from 50% in 2024 to 48% in H1 2025, making it more affordable for homebuyers.
What is the affordability index threshold for a city to be considered affordable?
The affordability index considers a 40% threshold as the limit of affordability. Cities with a lower percentage are considered more affordable.
What impact do RBI policies have on the housing market?
RBI policies, including the neutral stance on rates and a reduction in the Cash Reserve Ratio (CRR), have injected greater liquidity into the system, lowering the cost of borrowing and benefiting homebuyers and developers.
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