Lower Home Loan Rates Boost Housing Affordability Across Indian Cities In 2025

  

India’s housing market has witnessed a notable shift in 2025, as lower home loan rates have enhanced affordability for homebuyers across major cities. According to Knight Frank India’s latest Affordability Index, the Reserve Bank of India’s cumulative repo rate cuts of 125 basis points since February 2025 have reduced borrowing costs, making homeownership more accessible.  

The report highlights that affordability has improved in seven of the eight major Indian cities, with Ahmedabad emerging as the most affordable market. Pune and Kolkata follow closely, while Mumbai recorded a historic improvement, with its EMI-to-income ratio falling below 50% for the first time. This marks a new sustainable level of affordability in India’s most expensive housing market.  

Key highlights from the announcement include  

• Ahmedabad is the most affordable housing market with households spending 18% of income on EMIs.  
• Pune and Kolkata recorded affordability ratios of 22%, reflecting strong buyer-friendly conditions.  
• Mumbai’s EMI-to-income ratio declined to 47%, crossing below the critical 50% mark for the first time.  
• Delhi, Bengaluru, and Hyderabad also showed improved affordability, supported by moderated price growth.  
• RBI’s repo rate cuts since late 2024 have reduced borrowing costs, driving affordability gains.  
• Knight Frank’s Affordability Index tracks the share of household income allocated to EMIs across cities.  
• Improved affordability is expected to sustain housing demand and support real estate growth in 2026.  

This improvement in affordability signals a healthier housing market, balancing income growth, moderated property prices, and lower interest rates. With affordability ratios now at sustainable levels, India’s real estate sector is poised for steady expansion, offering opportunities for both developers and homebuyers.  

Sources: Knight Frank India Report, Fortune India, The Statesman, WebIndia123, The Tribune, Economic Times