India’s Affordability Landscape in H1 2025
In the first half of 2025, India’s residential real estate market witnessed a balancing act. Even as home prices continued to rise across major cities, housing affordability improved, thanks to supportive macroeconomic conditions. According to Knight Frank’s latest report on the Indian real estate sector, a combination of falling interest rates, easing inflation, and resilient income levels helped buyers across the country manage their EMIs more comfortably.
The Knight Frank Affordability Index, which tracks the proportion of income required to service a home loan EMI, found that most cities remained within the “affordable” threshold of 40%. The Reserve Bank of India’s 100 basis point cut in the repo rate (bringing it to 5.5%) significantly lowered borrowing costs, while inflation hit a six-year low of 2.82% in May 2025, easing pressure on household budgets.
What Is the Affordability Index?
The Affordability Index is calculated by measuring the share of a household’s monthly income that goes toward paying EMIs on a home loan. A score of 40% or below is considered affordable. The lower the index, the more affordable a city is for homebuyers.
In H1 2025, affordability improved across most urban centres despite ongoing property price increases. This was largely because income levels, especially in tech hubs, grew steadily while financial institutions lowered loan interest rates. The index tells us not only where prices are lower, but also where income levels and cost of living align to create the best conditions for homebuyers.
City-Wise Affordability Comparison
Here’s a snapshot of India’s top eight real estate markets, showing average residential prices and estimated EMI burden as a percentage of income:
| City | Avg. Home Price (INR/sq ft) | Price Change YoY | EMI-to-Income Ratio | Affordability Rank |
|---|---|---|---|---|
| Ahmedabad | ₹3,110 | +2% | ~25% | ⭐ Most Affordable |
| Kolkata | ₹3,891 | +7% | ~26% | High |
| Pune | ₹4,868 | +6% | ~28% | High |
| Chennai | ₹4,983 | +9% | ~27% | High |
| Hyderabad | ₹6,326 | +11% | ~29% | Moderate |
| Bengaluru | ₹7,052 | +14% | ~30% | Moderate |
| NCR | ₹5,535 | +14% | ~38% | Low |
| Mumbai | ₹8,532 | +8% | ~51% | 🚫 Least Affordable |
Ahmedabad: India’s Most Affordable Housing Market
Topping the affordability chart is Ahmedabad, where average residential prices stand at ₹3,110 per sq ft. Despite a 2% year-on-year increase, the city offers the lowest EMI burden, with households typically spending just 25% of their monthly income on home loans. This affordability is further supported by robust infrastructure growth, metro connectivity, and the rise of commercial hubs such as GIFT City.
Moreover, while much of India’s housing demand has shifted toward premium units, Ahmedabad still retains a significant share of sales in the sub-₹5 million segment, making it ideal for first-time homebuyers and middle-income families.
Mumbai: High Prices and Low Affordability
At the other end of the spectrum is Mumbai, India’s financial capital and its least affordable housing market. With average property prices at ₹8,532 per sq ft, homebuyers in the city typically need to commit over 50% of their income to EMIs. Despite a relatively modest 8% price hike, affordability remains severely stretched.
Mumbai’s affordability is hampered not only by high property values but also by steep registration and stamp duty charges. Even with interest rates coming down, only buyers with significant income levels or dual-income households can comfortably manage home loans in the city’s core areas.
Bengaluru and Hyderabad: A Tale of Income vs Price
Bengaluru saw one of the highest price increases in H1 2025, rising 14% year-on-year to ₹7,052 per sq ft. However, strong income growth—driven by the booming tech and GCC sectors—has kept affordability in check. On average, buyers spend 30% of their income on EMIs, making Bengaluru a relatively balanced market despite rising prices.
Hyderabad follows a similar pattern, with home prices averaging ₹6,326 per sq ft and EMI burdens around 29%. Rapid development in the western and northern corridors, improved infrastructure, and sustained job growth have helped the city maintain affordability, even amid a construction slowdown.
Kolkata, Pune, and Chennai: Quietly Affordable
Cities like Kolkata, Pune, and Chennai may not grab as many headlines as Bengaluru or Mumbai, but they continue to offer some of the most affordable real estate in the country. In Kolkata, prices average ₹3,891 per sq ft, and in Chennai and Pune, they hover just below ₹5,000.
The EMI-to-income ratios in all three cities are well under the 30% threshold. This affordability, combined with expanding infrastructure and emerging business districts, makes these markets attractive for long-term buyers.
Demand Shifts: From Budget to Premium
While affordability has improved, the composition of demand has shifted significantly. In H1 2018, homes priced below ₹5 million accounted for 54% of all residential sales. By H1 2025, that share has dropped to just 22%.
Instead, there is growing demand for homes in the ₹10–20 million and ₹20–50 million segments. Sales in the ₹20–50 million range grew by 29% year-on-year in H1 2025, reflecting rising aspirations and demand for larger, amenity-rich homes.
Interestingly, homes in the budget segment (<₹5 million) now face the highest inventory pressure. In Bengaluru, for instance, the Quarters-to-Sell (QTS) for this category is a whopping 16.6 quarters, compared to just 2.1 quarters for the ₹20–50 million bracket. This reflects a structural shift in buyer behavior, where even if lower-priced homes are technically more affordable, they’re no longer the preferred choice.
Why Inventory Matters to Affordability
While affordability from an EMI perspective has improved, inventory levels must also be considered. High unsold inventory in the lower ticket sizes could signal sluggish demand, while fast-moving inventory in mid-to-premium segments suggests stronger market alignment.
At the national level, unsold inventory rose by 4% year-on-year to 505,377 units in H1 2025. However, the average Quarters-to-Sell remained stable at 5.8 quarters, implying the market remains healthy overall.
The inventory build-up in the affordable housing segment is not necessarily a sign of distress—it’s an indication that affordability alone is no longer the top priority for many urban homebuyers.
Will Affordability Sustain in H2 2025?
With the interest rate environment expected to remain accommodative, housing affordability is likely to stay favorable in the second half of the year. Developers are also adapting to changing buyer preferences by focusing on mid-income and lifestyle-oriented projects.
Additionally, government incentives—such as stamp duty waivers, subsidized interest schemes, and infrastructure enhancements—are expected to support affordability further, especially in Tier 2 cities.
The real estate market is evolving from a volume-led, affordable housing model to a value-driven, aspiration-led market, where location, size, and amenities matter more than just price per square foot.
Conclusion
So, which Indian city is the most affordable to buy a home in 2025? The answer is clear: Ahmedabad stands out as the most affordable major city in India, closely followed by Kolkata, Pune, and Chennai. These cities offer a unique blend of livability, connectivity, and financial accessibility.
While rising prices and premiumization are changing the real estate landscape, India’s housing market remains fundamentally healthy. The current phase marks a structural transformation—not a distortion—driven by aspirational buyers, supportive policy, and an economy that is steadily gaining momentum.
For homebuyers, 2025 presents a unique window of opportunity to purchase in markets where affordability is backed not just by price, but by long-term value.
Also read, Why Bengaluru Homes Are Getting Bigger—and Pricier—in 2025