The housing market in India continues to evolve amidst a mix of rising property prices, fluctuating interest rates, and changing affordability dynamics. Delhi-NCR, the country’s largest urban real estate hub, has witnessed a shift in housing affordability levels over recent months. Despite a favorable growth trajectory in the Indian economy, affordability has worsened slightly in the Delhi-NCR region due to steep increases in residential property prices. However, the national picture tells a slightly different story, with cities like Ahmedabad and Pune seeing an improvement in affordability, aided by recent interest rate cuts.
In this blog, we explore the affordability trends in key Indian cities, especially Delhi-NCR, and discuss how RBI’s monetary policy adjustments have played a significant role in shaping housing affordability in 2025.
Affordability Across Major Indian Cities: A Snapshot
As the Indian economy continues to navigate volatile global conditions, its domestic housing market remains resilient, supported by steady income growth and favorable inflation rates. However, affordability challenges persist in several regions, with certain cities becoming more accessible while others remain out of reach for the average buyer.
- Ahmedabad remains the most affordable housing market among the top eight cities, with an affordability index of 18%.
- Pune follows closely at 22%, while Kolkata stands at 23%.
- Mumbai, traditionally the least affordable city, has seen a slight improvement. Its affordability level was 50% in 2024 and has dropped to 48% in H1 2025, thanks to the reduction in home loan rates.
- Delhi-NCR, on the other hand, has experienced a slight deterioration in affordability, with buyers now needing to pay 28% of their income to acquire an average property, compared to 27% in 2023.
Impact of Interest Rate Cuts and Rising Prices in Delhi-NCR
Despite the favorable economic environment, Delhi-NCR is witnessing a decline in affordability levels, primarily driven by the surge in residential property prices. The affordability index has worsened slightly from 27% to 28% in 2025. This increase can be attributed to the steep rise in property prices, which has eclipsed the effects of the interest rate cuts.
The Reserve Bank of India (RBI) slashed the repo rate by 100 basis points (bps) during H1 2025, which led to a slight improvement in affordability levels in cities like Mumbai, where the index dropped below the 50% threshold for the first time in history. However, the impact in NCR has been relatively muted, as residential prices in the region have risen significantly, leading to increased financial strain on potential homebuyers.
Key Factors Affecting Housing Affordability in Delhi-NCR:
- Rising Property Prices: Despite interest rate cuts, property prices in Delhi-NCR have risen steeply, negatively affecting affordability.
- Interest Rate Cuts: The 100 bps rate cut in 2025 by the RBI helped improve affordability in other regions, but the impact in NCR has been overshadowed by price hikes.
- Liquidity Boost: The RBI’s neutral stance and reduction in the Cash Reserve Ratio (CRR) in 2025 have unlocked significant liquidity in India’s financial system, making home loans more accessible in the future.
- Government Support: The government’s efforts to keep interest rates stable in the near term are expected to sustain current affordability levels, helping both homebuyers and developers.
Quick Facts & Highlights
| City | Affordability Ratio (2025) | Key Insights |
|---|---|---|
| Ahmedabad | 18% | Most affordable housing market among the top cities |
| Pune | 22% | Second most affordable with steady property growth |
| Kolkata | 23% | Affordability improving but prices still climbing |
| Mumbai | 48% | First drop below 50% mark in the history of the index |
| Delhi-NCR | 28% | Slight decline due to rising property prices |
Official Comments and Insights
According to Knight Frank India’s proprietary report, the housing affordability index showed marked improvements in several cities as the RBI’s rate cuts began to take effect. Shishir Baijal, Chairman and Managing Director at Knight Frank India, commented:
“Though interest rate cuts have improved affordability in some cities, Delhi-NCR’s housing market remains under pressure due to the sharp rise in residential prices. This is a cause for concern, especially for first-time homebuyers who are finding it harder to enter the market.”
FAQ Section:
Q1: What has caused the affordability in Delhi-NCR to worsen in 2025?
- The affordability in Delhi-NCR has worsened slightly due to steep increases in property prices. Although interest rate cuts by the RBI have helped, they have been overshadowed by the rapid rise in residential prices.
Q2: How have RBI’s rate cuts impacted housing affordability in India?
- RBI’s rate cuts have generally improved affordability across several cities, including Mumbai and Pune. However, their impact in Delhi-NCR has been somewhat muted because of rising property prices.
Q3: Which city is the most affordable for homebuyers in 2025?
- Ahmedabad is the most affordable city for homebuyers in 2025, with an affordability ratio of just 18%.
Q4: Is the affordability trend expected to improve or worsen in the near future?
- The RBI’s neutral stance on interest rates and liquidity infusion through CRR reduction suggests that affordability levels may stabilize, though property prices remain a key challenge in certain cities like Delhi-NCR.
Q5: What role does the RBI’s monetary policy play in housing affordability?
- The RBI’s monetary policy, including interest rate cuts and CRR reductions, has significantly impacted affordability by making home loans more accessible and boosting liquidity in the real estate market.