Mumbai's Housing Market Becomes More Affordable: A Closer Look

The numbers tell a story that would have seemed impossible just five years ago: buying a home in Mumbai now requires 47 percent of a household's income, down from 50 percent last year, and a crushing 93 percent in 2010, according to the Knight Frank India Affordability Index report.

It is the first time the financial capital has dipped below the 50 percent affordability threshold, a milestone banks use to determine whether a mortgage is sustainable. Above that line, lenders rarely approve loans. Below it, homeownership shifts from fantasy to possibility for millions of middle-class families.

The transformation extends well beyond Mumbai. Seven of India's eight largest cities saw housing become more accessible in 2025, driven by the Reserve Bank of India's aggressive 125 basis point rate cut since February. Those reductions reversed the damage from 2022, when the central bank hiked rates by 250 basis points over nine months to combat runaway inflation.

Ahmedabad emerged as the nation's most affordable housing market at 18 percent, followed by Pune and Kolkata, both at 22 percent. Chennai clocked in at 23 percent, while Bengaluru and Hyderabad held steady at 27 percent and 30 percent respectively.

The outlier? The National Capital Region, where affordability actually deteriorated, ticking up from 27 percent to 28 percent, following a surge in premium-segment launches that pushed weighted average prices higher as wealthy buyers snapped up luxury properties.

“Still far below the 50 percent stress threshold,” the report noted, suggesting NCR's slight slip doesn't signal broader trouble.

The affordability index is a critical tool for understanding the real estate market dynamics. It measures the percentage of household income required to service a mortgage for a median-priced home. A decrease in this percentage indicates that homes are becoming more affordable, which is a positive sign for the economy and for middle-class families aspiring to own a home.

The improvement in affordability is not just a local phenomenon but a reflection of broader economic trends. The Reserve Bank of India's rate cuts have played a crucial role in making mortgages more affordable. Lower interest rates reduce the cost of borrowing, making it easier for potential homeowners to secure loans and manage monthly payments.

However, the NCR's slight increase in the affordability index highlights the complexities of the housing market. The surge in luxury property launches has skewed the average prices, making it more challenging for middle-income families to find affordable options. This trend underscores the need for a balanced approach to property development that caters to a wider range of income levels.

In conclusion, the improving affordability in Mumbai and other major cities is a positive development for the Indian real estate market. It not only enhances the quality of life for middle-class families but also contributes to economic growth by boosting the housing sector. However, it is essential to monitor the market closely to ensure that the benefits of improved affordability are evenly distributed across all segments of the population.