India's Real Estate Boom: How Rising Home Prices Are Affecting the Lower Middle Class
Rising home prices in India's major cities are outpacing income growth, pushing many lower middle-class families out of the property market and into the rental sector.
Real EstateHousing MarketHome PricesRental CostsAffordabilityReal Estate NewsSep 14, 2025
This rapid escalation continues a decade-long trend of skyrocketing property values, where prices have more than doubled. But while the market surges forward, not everyone can keep pace.
Many prospective homeowners, especially those on the lower income spectrum, are being priced out of both urban and suburban markets. “The current problem is strong macro numbers have not benefited the population at the lower side of the pyramid and they are at a disadvantage,” said Ajay Sharma, Managing Director of Valuation Services at Colliers, according to the Reuters report.
He pointed out that stagnant disposable incomes are leaving many unable to buy homes, pushing them toward the rental market just to remain close to job opportunities and family support networks. As affordability in both core and suburban areas is on the decline, more people are renting – and as more people rent, rental costs have gone up. In fact, rental costs in city centres are projected to jump 5 per cent to 8 per cent in the coming year, surpassing the pace of general consumer inflation, claims the report.
Despite a 100 basis point interest rate cut by the Reserve Bank of India, which brought the key rate down to 5.50 per cent, property analysts are sceptical about its impact on affordability. While rate cuts could offer marginal relief in terms of EMIs, home prices continue to climb faster than borrowing costs are falling.
The latest Reuters survey shows a near-even split in sentiment: 10 of 19 analysts expect home-buying affordability to improve in the next year, while nine see it getting worse, which is a stark shift from June, when most expected better affordability.
Industry voices argue that deeper structural problems are being overlooked. Pankaj Kapoor of Liases Foras warned that the system is increasingly skewed toward the wealthy, resulting in long-term consequences for access to housing. “Post-financialisation in real estate, we have not improved affordability; we have worsened it to the point where the qualifying age to purchase a property has risen from around 30 to 40 years to 45 years old,” he said.
“Crony capitalism starts with land ownership. So how can cities, where the rich control the land, create affordable housing? That's why housing doesn’t give you choices – it gives you frustrated options,” he said, as per the report.
Frequently Asked Questions
What is the expected increase in home prices in India's major cities in 2025 and 2026?
According to a recent Reuters poll, home prices in India's major cities are expected to increase by 6.3 per cent in 2025 and 7.0 per cent in 2026.
How are rising home prices affecting the lower middle class in India?
Rising home prices are pricing out many lower middle-class families, pushing them into the rental market and making it difficult for them to afford homes in both urban and suburban areas.
What is the impact of the Reserve Bank of India's interest rate cut on the housing market?
Despite a 100 basis point interest rate cut by the Reserve Bank of India, property analysts are sceptical about its impact on affordability, as home prices continue to climb faster than borrowing costs are falling.
What are the structural issues in India's real estate market?
Industry experts argue that deeper structural problems, such as crony capitalism and land ownership by the wealthy, are being overlooked, leading to a worsening of affordability and limited options for lower-income families.
How are rental costs expected to change in the coming year?
Rental costs in city centres are projected to jump 5 per cent to 8 per cent in the coming year, surpassing the pace of general consumer inflation.
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