Mumbai Housing Market Sees Improved Affordability Due to Lower Home Loan Rates
Mumbai, known for its high real estate costs, has become more affordable for homebuyers as the Reserve Bank of India (RBI) cut the repo rate by 100 basis points. According to Knight Frank India's 'Affordability Index', the city's EMI to income ratio has dropped below the 50% threshold for the first time.
Mumbai Real EstateHome Loan RatesRbi Repo RateHousing AffordabilityKnight Frank IndiaReal Estate NewsJun 24, 2025
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.'
Frequently Asked Questions
What is the Affordability Index?
The Affordability Index tracks the EMI (Equated Monthly Instalment) to income ratio for an average household, indicating the proportion of income required to fund the EMI of a housing unit in a particular city.
What is considered an unaffordable EMI to income ratio?
An EMI to income ratio over 50% is considered unaffordable, as it is the limit beyond which banks rarely underwrite a mortgage.
How much did Mumbai's affordability level improve?
Mumbai's affordability level improved by over 2 percentage points, moving from 50% in 2024 to 48% in the first half of 2025.
Which cities are the most affordable according to the index?
Ahmedabad is the most affordable city with a ratio of 18%, followed by Pune at 22% and Kolkata at 23%.
What impact does the RBI's repo rate cut have on homebuyers?
The RBI's repo rate cut reduces home loan rates, which in turn reduces the EMI burden on homebuyers, making it easier for them to purchase homes.
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