Mumbai Housing Market Sees Improved Affordability Due to Lower Home Loan Rates

New Delhi: Mumbai, traditionally one of the most expensive real estate markets in India, has become more affordable for homebuyers due to a reduction in home loan rates. This improvement is a result of the Reserve Bank of India (RBI) cutting the repo rate by 100 basis points since February this year, according to real estate consultant Knight Frank India.

On Tuesday, Knight Frank India released its proprietary report 'Affordability Index', which tracks the EMI (Equated Monthly Instalment) to income ratio for an average household. The index indicates the proportion of income a household needs to fund the EMI of a housing unit in a particular city. An EMI to income ratio over 50% is considered unaffordable, as it is the limit beyond which banks rarely underwrite a mortgage.

Ahmedabad is the most affordable housing market among the top eight cities, with a ratio of 18%, followed by Pune at 22% and Kolkata at 23%. Mumbai, which has historically been the least affordable city, saw its affordability level drop from 50% in 2024 to 48% in the first half of 2025. This is the first time in the history of the index that Mumbai has come below the 50% threshold, which is considered the outer point of affordability.

House purchase affordability has improved in seven out of eight cities tracked by Knight Frank in the first half of this year. The affordability index level in Mumbai improved by over 2 percentage points, moving from 50% in 2024 to 48% in H1 2025. Mumbai's market, which has always been above the threshold, has now become more affordable due to the reduced home loan rates.

The affordability index remained flat in Bengaluru and Hyderabad at 27% and 30%, respectively. In Chennai, the affordability index improved to 24% in January-June 2025 from 25% last year. However, Delhi-NCR has become slightly unaffordable, with an index of 28% in H1 2025, up from 27% last year.

Commenting on the report, Angad Bedi, CMD of BCD Group, said, 'The RBI's rate cut is a positive development for homebuyers as it will help reduce the EMI burden and accelerate sales of residential units. This will propel fence sitters to invest in residential markets before further price increases due to rising land and construction costs.'

Bhavesh Kothari, Founder & CEO of Property First Realty, added, 'The three repo rate cuts in the first half of 2025 are expected to bring respite to new homebuyers from the significant price increases seen in the last year. The reduction in EMI load will translate into higher savings.'

Bengaluru-based developer Sanjeevini Group Chairman and Founder Umesh Gowda H.A. noted, 'The EMI burden on homebuyers has reduced. As economic growth gains momentum amidst falling inflation and rising incomes, home buying sentiments will further improve in the coming quarters.'