Mint Explainer | Cheaper loans, rising prices—is buying a home really affordable?

Mint breaks down what’s driving this improvement and why affordability is still under pressure.India’s residential real estate market continues to see strong demand. Despite housing prices being on the rise, certain cities, including Mumbai, the country’s most valuable property market, are seeing improving homebuyer affordability.Knight Frank’s Affordability Index, which measures the proportion of household income spent on equated monthly instalments (EMIs), shows a consistent improvement across the top eight cities since 2010.Affordability is influenced by three key factors: weighted average prices, income levels and home loan interest rates.

Improved income levels and reduced interest rates have strengthened overall home affordability.Earlier this month, the Reserve Bank of India cut the repo rate by 25 basis points to 5.25%. The move takes the cumulative reduction in repo rate to 125 basis points this year.A 25 basis point reduction is seen as a sentiment booster, especially for first-time home buyers, but consecutive rate cuts reinforce a supportive financing environment and could strengthen sales momentum in an already upbeat residential sector.Affordable and mid-income housing segments typically benefit the most due to their higher sensitivity to borrowing costs.Mumbai may continue to make headlines with its ₹100 crore apartment deals, but housing affordability in the city has relatively improved.

The EMI-to-income ratio declining to 47% in 2025 means the affordability level in Mumbai has improved since the pandemic.A stable business and income growth environment, coupled with reasonable price growth and an enabling financing environment, were the major factors behind this. Similarly, Ahmedabad is the most