The Vanishing Affordable Homes: India's Housing Market Crisis
In India's major cities, affordable homes are rapidly disappearing, while luxury towers are proliferating. The gap between household income and home prices is widening, making it increasingly difficult for the middle class to buy homes.
Affordable HomesHousing MarketMiddle ClassProperty PricesFinancial RatiosReal Estate NewsJul 01, 2025
Between 2020 and 2024, India’s household income rose at just 5.4% CAGR. Property prices, by contrast, surged 9.3%, according to Finology, a wealth advisory firm. This growing mismatch is warping access to housing — not just for the poor, but increasingly for the middle class.
The market’s shift is stark. In 2022, India had 3.1 lakh affordable homes (priced under ₹1 crore). By 2024, that number had collapsed by 36% to 1.98 lakh. Simultaneously, luxury housing supply exploded — up 192% in Delhi-NCR, 187% in Bengaluru, and 127% in Chennai.
The cities hit hardest by shrinking affordability were the ones already under pressure: Hyderabad saw a 69% drop in affordable units, Mumbai 60%, and NCR 45%. Only Kolkata bucked the trend, with a 7% rise.
Two financial ratios lay bare the crisis. The price-to-income (P/I) ratio — a global measure of affordability — now averages 11 in India. That means a household needs 11 years’ income to buy a home. The accepted benchmark is 5. Mumbai leads with a staggering 14.3; Delhi clocks in at 10.1.
Then there’s the EMI-to-income (EMI/I) ratio, which tracks what portion of a household’s income goes to home loan EMIs. A ratio above 50% is considered unaffordable. India’s average stands at 61% — up sharply from 46% in 2020.
The distortions aren’t accidental. Developers frequently underreport sale prices using artificially low government circle rates, then take the remainder in cash — avoiding taxes and pushing up real prices. Black money continues to flow through these loopholes.
Simultaneously, India’s low Floor Space Index (FSI) throttles supply. Mumbai has 542 high-rises. Singapore? Over 2,600. Tokyo, New York, and even Delhi allow for much higher vertical growth.
Fixing this crisis will require deep policy reform: monthly circle rate revisions, a centralized digital platform via RERA, vacancy taxes on empty homes, and tighter controls on NRI investment. The government must also boost housing supply in tier-2 and tier-3 cities — not just metros.
Frequently Asked Questions
What is the price-to-income (P/I) ratio and why is it important?
The price-to-income (P/I) ratio is a measure of housing affordability. It indicates how many years of a household's income is required to buy a home. A higher P/I ratio suggests that homes are less affordable. The accepted benchmark is 5, but in India, it averages 11, with Mumbai leading at 14.3.
How has the supply of affordable homes changed in India between 2022 and 2024?
Between 2022 and 2024, the number of affordable homes (priced under ₹1 crore) in India dropped by 36%, from 3.1 lakh to 1.98 lakh. This decline is particularly severe in cities under pressure, such as Hyderabad (69% drop), Mumbai (60% drop), and NCR (45% drop).
What is the EMI-to-income (EMI/I) ratio and why is it significant?
The EMI-to-income (EMI/I) ratio measures the portion of a household’s income that goes toward home loan EMIs. A ratio above 50% is considered unaffordable. In India, the average EMI/I ratio has risen sharply from 46% in 2020 to 61% in 2024, indicating a significant burden on households.
What are the main factors contributing to the housing market crisis in India?
The main factors include the widening gap between household income and property prices, underreporting of sale prices to avoid taxes, the low Floor Space Index (FSI) which limits vertical growth, and the flow of black money through loopholes in the system.
What policy reforms are suggested to address the housing market crisis?
Suggested reforms include monthly revisions of circle rates, the implementation of a centralized digital platform via RERA, the introduction of vacancy taxes on empty homes, and tighter controls on NRI investment. Additionally, the government should focus on boosting housing supply in tier-2 and tier-3 cities.
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