Ahmedabad, Pune, Kolkata Top India's Most Affordable Housing Markets in 2024

Ahmedabad, Pune, and Kolkata have emerged as the most affordable housing markets in India, according to Knight Frank India’s Affordability Index for the first half of 2024. The index, which measures the Equated Monthly Instalment (EMI) to income ratio, reveals that these cities offer significant cost advantages for homebuyers compared to other major property markets.

Ahmedabad leads the affordability charts with an EMI to income ratio of 21% for an average household. Pune and Kolkata follow closely with ratios of 24%. In contrast, Mumbai remains the least affordable among the key cities, with an EMI to income ratio of 51%. This figure highlights the ongoing challenge of housing affordability in the financial capital, despite improvements over the past years.

Knight Frank India’s Chairman and Managing Director, Shishir Baijal, emphasized the importance of stable affordability in maintaining homebuyer demand. “Stable affordability is essential to sustaining homebuyer demand and sales momentum, which, in turn, acts as a key economic driver for the country”, Baijal stated. He noted that as income levels rise and economic growth strengthens, consumers’ confidence in making long-term financial commitments toward asset creation improves.

The Affordability Index has shown consistent stability across the top eight property markets in India, with interest rates remaining steady since the end of 2023. The Reserve Bank of India (RBI) has maintained a stable policy rate since February 2023, following a period of increased rates aimed at curbing inflation. This stability has played a crucial role in supporting homebuyer affordability, counteracting the impact of rising property prices and high interest rates.

The period from 2010 to 2021 saw steady improvement in affordability, particularly during the pandemic when the RBI reduced the repo rate to historic lows. However, the central bank’s subsequent rate hikes in 2022 had a temporary adverse effect on affordability. The current steady rate environment, coupled with healthy income growth, has helped restore affordability to pre-2022 levels.

The residential real estate market has experienced robust demand, with sustained momentum since 2023. This trend is expected to continue as economic growth remains strong and interest rates stay stable. The COVID-19 pandemic catalyzed a significant shift in the residential market, recalibrating property prices and lending rates, and fostering a buoyant demand for homes.

Mumbai’s affordability index improved markedly from 67% in 2019 to 51% in the first half of 2024. This 16-percentage-point improvement underscores the effectiveness of the RBI’s policies and the controlled rise in property prices in enhancing affordability.