Mumbai Homebuyers Catch a Break as Affordability Falls Below Key Threshold
Buying a home in Mumbai has become meaningfully more affordable for the first time in over a decade, marking a structural shift in India’s most expensive property market. According to the Knight Frank India Affordability Index, purchasing a home in Mumbai now requires 47 percent of a household’s income, the lowest level in 15 years.
The milestone is significant. Just five years ago, the figure stood well above sustainable levels, and in 2010 it peaked at a staggering 93 percent, making ownership unattainable for most households. Even as recently as last year, buyers needed to allocate 50 percent of income toward EMIs. Falling below that threshold is crucial, as banks typically consider mortgages viable only when EMIs remain under half of household earnings.
This improvement signals a broader affordability revival across India’s housing markets, driven by lower interest rates and faster income growth, reshaping buyer sentiment after years of stress.
Lower Interest Rates Rewrite the Housing Math Across Cities
The affordability turnaround is closely linked to monetary policy. Since February, the Reserve Bank of India has cut policy rates by 125 basis points, reversing much of the tightening seen in 2022, when rates were raised aggressively to tame inflation.
Those earlier hikes had sharply lifted EMIs and squeezed affordability. The recent easing has had the opposite effect, bringing borrowing costs down and restoring purchasing power for households across urban India.
Seven of India’s eight major cities recorded improved affordability in 2025, underscoring how widespread the impact has been.
Also Read : IT stocks slide up to 3% after Infosys raises fresher salaries; analysts see pressure on margins
Ahmedabad Emerges as India’s Most Affordable Housing Market
While Mumbai’s improvement grabbed headlines, Ahmedabad emerged as the most affordable housing market in the country, with an EMI-to-income ratio of just 18 percent. That was followed by Pune and Kolkata, both at 22 percent, reflecting steady income growth and moderate property price appreciation.
Other cities also remained comfortably within sustainable limits:
-
Chennai at 23 percent
-
Bengaluru at 27 percent
-
Hyderabad at 30 percent
The only city to buck the trend was the National Capital Region (NCR), where affordability marginally worsened from 27 percent to 28 percent. The shift was driven by a surge in premium and luxury housing launches, which lifted average prices as affluent buyers dominated demand.
“Still far below the 50 percent stress threshold,” the report noted, indicating that NCR’s slippage does not yet pose systemic risk.
Income Growth, Not Just Rate Cuts, Drives the Shift
The affordability gains are not solely a function of cheaper loans. A more fundamental change is underway: household incomes are rising faster than home prices, a reversal of the long-standing trend in Indian real estate.
“Income levels have been rising faster than housing prices, and combined with lower interest rates, affordability has strengthened across most cities,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India.
This dynamic has helped ensure that affordability gains are not merely cyclical but potentially more durable, especially in cities where supply has remained disciplined.
Mumbai’s Breakthrough Reflects Structural Improvement
Mumbai’s dip below the 50 percent affordability mark appears more than symbolic. Analysts say it reflects a confluence of:
-
Moderate price growth
-
Strong income expansion
-
Greater availability of housing finance
Unlike past cycles, the improvement is not driven by speculative price corrections but by fundamentals that appear stable for now.
For middle-class buyers long priced out of the city, homeownership has shifted from a distant aspiration to a realistic possibility.
Looking Ahead: Is This a Temporary Window or a New Normal?
Knight Frank expects affordability conditions to remain supportive into 2026, citing macroeconomic stability and growth visibility.
“Given the RBI’s robust GDP growth estimate of 7.3 percent for FY2026 and a benign interest rate environment, affordability levels are expected to remain supportive of homebuyer demand in 2026,” Baijal said.
That said, sustainability may vary by city. In markets such as Ahmedabad, Pune, and Kolkata, balanced supply and restrained pricing could support steady demand without boom-bust cycles. In contrast, cities with rising luxury launches may see headline affordability mask diverging realities across segments.
What This Means for Homebuyers
For prospective buyers, current conditions present a rare alignment of favorable factors:
-
Lower EMIs due to reduced interest rates
-
Stronger income growth
-
Improved lender willingness to extend mortgages
However, experts caution that this window depends heavily on external variables—monetary policy, economic growth, and developer pricing discipline.
For now, the data suggests a meaningful opportunity. Whether it lasts will depend on how India’s economy, interest rates, and housing supply evolve over the next few years.
