In the bustling city of Mumbai, the housing market has been undergoing significant transformations, particularly concerning affordability. A recent report by Knight Frank highlights that housing affordability across major Indian cities has notably improved in 2025, with Ahmedabad and Pune emerging as frontrunners in this category. This shift is primarily attributed to lower home loan interest rates, which have provided much-needed relief to potential homebuyers and invigorated residential demand across the nation.
The findings from Knight Frank's latest Affordability Index reveal that seven out of the top eight cities have experienced an enhancement in housing affordability. Ahmedabad has taken the lead, boasting an impressive EMI-to-income ratio of just 18%. Following closely are Pune and Kolkata, each reporting a ratio of 22%. A lower EMI-to-income ratio indicates that households are allocating a smaller percentage of their income towards home loan repayments, thereby making housing more accessible for the average citizen.
Interestingly, the report also marks a significant milestone for Mumbai, where the EMI-to-income ratio has dropped to 47%. This is the first instance in the city's history where the affordability metric has dipped below the crucial 50% threshold, a critical point where banks tend to reassess their lending practices. This development signals a more sustainable environment for homebuyers in one of India's most expensive residential markets.
The overall improvement in affordability is particularly remarkable considering the volatile interest-rate landscape experienced over the past few years. While the period from 2010 to 2021 saw a strengthening in affordability, the situation became precarious in 2022 due to a sharp increase in the RBI's repo rate. However, with stability returning to interest rates in early 2023, followed by a 125 basis point cut since February 2025, conditions have once again tilted favorably for prospective homebuyers. Knight Frank's analysis emphasizes that this supportive rate environment is crucial for fostering a flourishing housing market in India.
In conclusion, the housing markets in Ahmedabad and Pune are set to become the most affordable options in 2025, providing a viable pathway for many individuals and families looking to invest in their future. As these cities continue to lead the charge in affordability, it sets a positive precedent for other urban areas, paving the way for a more inclusive and accessible housing landscape across India.