India’s urban housing markets entered a more buyer-friendly phase in 2025 as falling interest rates significantly improved home loan affordability across major cities, according to a new affordability assessment by a global property consultancy. Mumbai, long considered one of the world’s least affordable housing markets, recorded a structural shift as monthly loan burdens fell below critical stress levels for the first time.
The consultancy’s Affordability Index, which tracks the share of household income required to service home loan instalments, showed broad-based improvement driven primarily by easing borrowing costs and steady income growth. Ahmedabad emerged as the most affordable housing market among the eight largest Indian cities, followed by Pune and Kolkata, reinforcing the growing role of tier-one but non-metro-heavyweight cities in India’s residential landscape. Mumbai marked a historic milestone as its affordability ratio declined to 47 per cent, breaching the long-held 50 per cent threshold widely regarded by lenders as the outer limit of mortgage viability. Urban economists note that this shift reflects more than cyclical relief. “It signals a recalibration of prices, incomes and interest rates that has been years in the making,” said a housing finance expert familiar with the data. The index defines affordability as the proportion of household income required to pay monthly home loan instalments. A lower ratio indicates a healthier balance between earnings and housing costs, while levels above 50 per cent are typically seen as financially unsustainable. Mumbai’s improvement follows several years of gradual correction triggered during the pandemic, when softer pricing and aggressive monetary easing reshaped buyer behaviour. Other major markets presented a mixed picture. Delhi NCR was the only large region to witness a marginal decline in affordability, largely due to rising average home prices driven by strong premium housing demand. Even so, analysts pointed out that affordability levels in the capital region remain comfortably below stress thresholds.
Bengaluru and Hyderabad held steady, supported by parallel growth in wages and property values. Urban planners argue that stable affordability in these cities has helped sustain end-user demand without triggering speculative excess, particularly in well-connected suburban and mixed-use corridors. The longer-term trend underscores the influence of monetary policy. After a sharp interest rate hike cycle beginning in mid-2022 temporarily strained affordability, rate stability from early 2023 and subsequent cuts since 2025 have restored balance. Since early 2025, policy rate reductions have translated into lower mortgage costs, improving buyer confidence amid steady economic growth. Industry observers caution, however, that affordability gains must be complemented by sustainable urban development. “Lower EMIs help, but cities must also address land use efficiency, transit access and energy performance if affordability is to be durable,” said an urban policy specialist.
As Indian cities expand, the current affordability window presents an opportunity to align housing growth with climate resilience, inclusive neighbourhood planning and lower household energy costs factors increasingly central to building equitable and future-ready urban environments.
Also Read: Bengaluru Wealthy Buyers Prefer Better Homes Over Bigger Says White Lotus CEO
Mumbai Interest Rate Cuts Boost Housing Affordability Delhi NCR Sees Marginal Dip
