Ahmedabad Tops the Chart as India’s Most Affordable City for Homebuyers in 2025, Followed by Pune and Kolkata
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In a significant boost to aspiring homeowners, housing affordability in India’s key metropolitan cities has seen a noticeable upswing during the first half of 2025. According to the latest Affordability Index report released by Knight Frank India, Ahmedabad has claimed the top spot as the country’s most affordable city for homebuyers. Close on its heels are Pune and Kolkata, cementing their positions as attractive markets for budget-conscious property seekers.
The rise in affordability is largely credited to the Reserve Bank of India’s monetary policy decisions. Since February 2025, the central bank has slashed the repo rate by 100 basis points, effectively bringing down the cost of borrowing. As a result, monthly EMIs for home loans have become more manageable, easing the financial burden for countless homebuyers.
The Knight Frank Affordability Index, which calculates the percentage of a household’s income spent on monthly EMIs, indicates that Ahmedabad leads with a ratio of just 18%. This means that average households in the city use only 18% of their income to repay home loans, far below the affordability threshold of 40%. Pune and Kolkata follow with EMI-to-income ratios of 22% and 23% respectively, making them strong contenders for homeownership in urban India.
Perhaps the most surprising shift comes from Mumbai. Known for its sky-high real estate prices, the city has historically remained outside the affordability range. However, 2025 marks a historic moment — for the first time since the inception of the index, Mumbai’s affordability ratio has dipped below 50%. With an index reading of 48%, compared to 50% in 2024, Mumbai is now considered slightly more accessible for homebuyers, thanks to lower interest rates making EMIs less burdensome.
While affordability has improved in most major cities, the National Capital Region (NCR) has seen a marginal decline. In NCR, the affordability ratio inched up to 28% in the first half of 2025 from 27% in 2023. This minor deterioration is attributed to a sharp rise in residential property prices, which outpaced the benefits of lower interest rates in the region.
Knight Frank India’s Chairman and Managing Director, Shishir Baijal, emphasized the broader impact of these affordability trends on the real estate market and the economy. “Affordability plays a critical role in maintaining homebuyer demand and sustaining sales momentum, both of which are vital contributors to the broader economy. As incomes grow and the economy gains strength, financial confidence among end-users improves, motivating them to commit to long-term investments such as home ownership,” he noted.
The improved affordability levels come at a time when India’s macroeconomic indicators are showing positive signs. The RBI’s projected GDP growth of 6.5% for FY 2026, stable inflation, and better wage growth have created a favourable climate for housing demand. Additionally, the central bank’s neutral stance on future interest rates and a reduction in the Cash Reserve Ratio (CRR) have increased liquidity in the financial system. This has not only made loans more accessible but also injected momentum into both the developer and homebuyer segments of the market.
Historically, housing affordability in India had been improving steadily from 2010 to 2021, especially during the COVID-19 pandemic when the RBI cut repo rates to decade-low levels. However, in 2022, the central bank had to reverse this trend and raise the repo rate by 250 basis points over nine months to combat rising inflation, putting pressure on home loan borrowers. Now, with inflation under better control and the RBI once again focusing on economic growth, the 100 basis point rate cut since February 2025 has brought much-needed relief to homebuyers.
According to Knight Frank, current affordability levels are the best they’ve been since the post-pandemic recovery began. Notably, seven out of eight major cities saw an improvement in affordability during the first half of 2025, reinforcing the positive sentiment among buyers.
