Mumbai's housing affordability improves: Now requires 47% of income
What's the story
The latest Knight Frank India Affordability Index report has revealed that purchasing a home in Mumbai now costs 47% of a household's income. The figure is an improvement from last year's 50% and a far cry from the staggering 93% in 2010. This is the first time that Mumbai has dipped below the crucial affordability threshold of 50%, which banks consider while approving mortgages.
Nationwide trend
Affordability improvements extend beyond Mumbai
The improvement in housing affordability isn't limited to Mumbai. Seven of India's eight largest cities have witnessed a similar trend in 2023, thanks to the Reserve Bank of India's aggressive 125 basis point rate cut since February. The cuts have undone the impact of 2022 when the central bank hiked rates by 250 basis points over nine months to tackle soaring inflation.
Affordability rankings
Ahmedabad tops as the most affordable housing market
Ahmedabad has been ranked as the most affordable housing market in India, requiring just 18% of a household's income. It is followed by Pune and Kolkata, both at 22%. Chennai comes next at 23%, while Bengaluru and Hyderabad remain unchanged at 27% and 30%, respectively. The National Capital Region (NCR) was an exception with affordability declining from 27% to 28%, due to an increase in premium-segment launches that drove prices up.
Market dynamics
Income growth outpaces property prices in India
The improvement in affordability isn't just due to interest rate cuts. Household incomes have been rising faster than property prices, a rare reversal of the usual trend in Indian real estate. Shishir Baijal, Chairman and Managing Director of Knight Frank India, said, "Income levels have been rising faster than housing prices, and combined with lower interest rates, affordability has strengthened across most cities."
Market forecast
Future outlook for housing affordability in India
Knight Frank anticipates that the favorable conditions will continue into 2026, given the RBI's GDP growth forecast of 7.3% for the next fiscal year and continued economic stability. Baijal said, "Given the RBI's robust GDP growth estimate of 7.3% for FY2026 and a benign interest rate environment, affordability levels are expected to remain supportive of homebuyer demand in 2026."