Ahmedabad, Kolkata, Pune most affordable, Mumbai falls below 50% EMI ratio

Ahmedabad, Kolkata, Pune most affordable, Mumbai falls below 50% EMI ratio

India’s housing affordability improved across seven of the top eight cities in 2025, powered by sharply lower home loan interest rates and steady income growth, according to Knight Frank India’s latest Affordability Index. The improvement comes after the Reserve Bank of India cut the repo rate by 125 bps since February 2025, reversing the affordability hit caused by the 250 bps rate hike cycle of 2022.

 

For the first time in recorded history, Mumbai—India’s most expensive real estate market—has breached the affordability threshold, with the EMI-to-income ratio falling to 47% in 2025, down from 50% last year and a steep decline from 93% in 2010. 

The Knight Frank Affordability Index indicates the proportion of income that a household requires, to fund the monthly instalment (EMI) of a housing unit in a particular city. So, a Knight Frank Affordability index level of 40% for a city implies that on an average, households in that city need to spend 40% of their income to fund the EMI of housing loan for that unit. An EMI/ Income ratio over 50% is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage.

Assumptions:

•  EMI, housing unit size and price/ sq ft represent city-level averages.
• EMI:
•  Loan Tenure – 20 years
• Loan to Value – 80%
•  Home loan interest rate - Average home loan rates
•  Area of housing unit: House size is fixed for each city across the years but varies within different cities taking into account the average size preference for each city.

Housing Price: Median housing price for that city

 

Across India, Ahmedabad (18%), Pune (22%), and Kolkata (22%) emerged as the most affordable markets, while NCR was the only city where affordability worsened, rising marginally from 27% to 28% due to a surge in premium-segment launches pushing up weighted average prices. 

Affordability Index of leading eight cities of India