Kolkata Real Estate Market Becomes More Affordable with Interest Rate Cuts

Kolkata has emerged as one of the most affordable housing markets in India, with only Ahmedabad being slightly ahead, according to a study by Knight Frank India. The Affordability Index, which measures the proportion of household income spent on EMIs, has pegged Kolkata's affordability index at 22%, the same as Pune and slightly higher than Ahmedabad's 18%.

This means that just over a fifth of the annual income of buyers is spent on EMIs in Kolkata. In comparison, the affordability index for Mumbai is 47%, Hyderabad's is 30%, Delhi NCR's is 28%, Bengaluru's is 27%, and Chennai's is 23%.

The city's real estate market has seen a significant shift in home affordability following recent reductions in interest rates on home loans. This development is particularly impactful in a price-sensitive city like Kolkata, where even a small rise or fall in interest rates can significantly influence the decisions and lives of aspiring home buyers.

The Knight Frank India (KFI) report shows a consistent improvement in affordability across eight major Indian cities between 2010 and 2021. Affordability strengthened further during the pandemic as the Reserve Bank of India (RBI) lowered the policy repo rate to decade-lows. However, in response to elevated inflation, the RBI increased the repo rate by 250 basis points over a nine-month period beginning May 2022, leading to a temporary deterioration in affordability during 2022.

Affordability in the real estate market in Kolkata has improved from 45% in 2010 to 22% currently. According to KFI data, this is the most affordable scenario in Kolkata in the past seven years. The ratio of EMI has reduced from 32% in 2019 to 30% in 2020, 25% in 2021, 24% in 2023, and 22% now.

More recently, with economic growth remaining resilient and inflation easing materially, the RBI has reduced the repo rate by 125 basis points since February, resulting in a further improvement in affordability across most housing markets. This supportive rate environment has helped residential sales sustain close to the post-pandemic peak recorded in 2024. The supportive environment is likely to continue into 2026, underpinned by the Indian economy's sustained and stable growth momentum.

The reduction in interest rates has effectively lowered the cost of borrowing, making it easier for potential homeowners to secure financing for their dream properties. This change is a boon for first-time homebuyers and those looking to upgrade their living situations, as it reduces the overall financial burden associated with purchasing a home.

Developers in Kolkata are witnessing a surge in interest from homebuyers who are eager to take advantage of the favorable lending conditions. They believe that this will particularly stimulate the affordable housing market, which is more sensitive to changes in interest levels than other segments. The improved affordability is expected to boost the real estate sector, creating more opportunities for both buyers and developers in the coming years.