Mumbai Housing Market Affordability Index Improves With Reduction In Home Loan Rate: Knight Frank

New Delhi: Mumbai, the costliest real estate market, has become a bit affordable due to reduction in home loan rate following RBI's decision to cut repo rate by 100 basis points since February this year, according to Knight Frank India.

On Tuesday, real estate consultant Knight Frank India released its proprietary report 'Affordability Index', which tracks the EMI (Equated Monthly Instalment) to income ratio for an average household. The index indicates the proportion of income that a household requires to fund the EMI of a housing unit in a particular city.

An EMI/ Income ratio over 50 per cent is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage.

"Ahmedabad is the most affordable housing market among the top eight cities, with a ratio of 18 per cent, followed by Pune at 22 per cent and Kolkata at 23 per cent. Mumbai was the least affordable city with an affordability level of 48 per cent," the consultant said.

House purchase affordability of homebuyers has improved in the first half of this year in seven out of eight cities tracked by Knight Frank as the RBI slashed the repo rate by 100 bps during the period.

In Mumbai, the affordability index level improved by over 2 percentage points, moving from 50 per cent in 2024 to 48 per cent in H1 2025.

This is the first time in the history of the index that Mumbai has come below the threshold of 50 per cent, which is considered outer point of affordability, the consultant said.

"Mumbai's market which has always been above the threshold has now become more affordable due to the reduced home loan rates," Knight Frank said.

The affordability index remained flat in Bengaluru and Hyderabad at 27 per cent and 30 per cent, respectively.

In Chennai, the affodability index improved to 24 per cent in January-June 2025 from 25 per cent last year.

However, Delhi-NCR has become bit unaffordable with index of 28 per cent in HI 2025 from 27 per cent last year.

Commenting on the report, Angad Bedi, CMD, BCD Group, said, the RBI's rate cut is a positive development for homebuyers as it will help cool off the EMI burden and accelerate sales of residential units. "This will propel fence sitters to invest in residential markets before further price increase due to rise in land and construction costs." Bhavesh Kothari, Founder & CEO, Property First Realty, said, "The three repo rate cuts in the first half of 2025 is expected to bring respite to new homebuyers from the significant price increases seen in the last one year or so while softening the EMI load, translating into higher savings." Bengaluru-based developer Sanjeevini Group Chairman and Founder Umesh Gowda H.A, said the EMI burden on homebuyers has reduced.

"As economic growth gains momentum amidst falling inflation and rising incomes, home buying sentiments will further improve in the coming quarters," he said.