Mumbai's Housing Affordability Surges While NCR Deteriorates: Knight Frank India Report
Mumbai, traditionally known for its high real estate costs, has seen a significant improvement in housing affordability, according to Knight Frank India's latest report. However, the National Capital Region (NCR) faces a contrasting scenario with worsening affordability.
Housing AffordabilityReal EstateMumbaiNcrInterest RatesReal Estate MumbaiJun 24, 2025
Back in 2010, the index for Mumbai was at 93–94, and that has come below 50 for the first time, as we are marking right now, Zia stated, adding that this means affordability in Mumbai has improved a lot. This development comes as the report indicates that interest rate cuts have boosted affordability across the board in H1 2025.
However, this positive shift isn't uniform across all major urban centers. While Ahmedabad, Pune, and Kolkata stand out as the most affordable markets, the National Capital Region (NCR) presents a contrasting picture. NCR is the only market where affordability has worsened; in all the other markets, affordability is improving, Zia noted, observing that NCR's index has risen from around 25-26 to 28. Kolkata and Hyderabad continue to be very affordable, despite Hyderabad experiencing a notable increase in property prices.
Beyond affordability, the Indian housing market is currently characterized by a robust velocity of sales, which has outpaced new inventory launches over the last three years. This accelerated sales rate has effectively absorbed much of the previously existing housing stock, easing concerns about inventory overhang in most cities, barring Bengaluru and NCR, where price increases have been quite phenomenal.
The improved affordability can largely be attributed to a favorable interest rate environment. Home loan interest rates coming down have directly translated into lower EMI burdens for potential buyers. Zia explained that a 100-basis point cut by the RBI has had a huge impact, and the recent 200-basis point reduction in Mumbai’s home loan rates further underscores this trend, making homes more accessible.
Despite the positive demand environment, a critical challenge looms on the supply side, particularly for the affordable housing segment. While the mid-to-upper end of the market is well-catered to by developers, the lowest segment is suffering from a lack of new inventory. At the bottom end of the market, where affordability matters most, you’re right—interest rates matter. But in that segment, none of the known developers are catering to the demand, and that’s a big issue, Zia cautioned.
This supply-side gap, especially after the renewed interest spurred by initiatives like Pradhan Mantri Awas Yojana 2.0 in October 2024 and falling interest rates, poses a significant risk. With demand expected to revive strongly in the affordable segment but insufficient inventory from established players, there is a distinct possibility that prices may shoot up in that segment—and that’s a big risk we are facing right now, Zia concluded, highlighting a potential bottleneck in the market's recovery for this crucial buyer group.
Frequently Asked Questions
What is the Affordability Index report by Knight Frank India?
The Affordability Index report by Knight Frank India is a comprehensive analysis of housing affordability across major cities in India, assessing factors such as interest rates, property prices, and EMI burdens for potential buyers.
Why has Mumbai seen an improvement in housing affordability?
Mumbai has seen an improvement in housing affordability primarily due to significant cuts in interest rates, which have reduced the EMI burdens for potential buyers.
What is the current state of housing affordability in the National Capital Region (NCR)?
The National Capital Region (NCR) is the only major market where housing affordability has worsened, with the affordability index rising from around 25-26 to 28.
Which cities are currently the most affordable in India?
Ahmedabad, Pune, and Kolkata are currently the most affordable cities in India, according to the Knight Frank India report.
What is the main challenge in the affordable housing segment in India?
The main challenge in the affordable housing segment in India is the lack of new inventory from established developers, particularly in the lowest segment of the market.
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