Home affordability holds firm despite rising prices: Knight Frank

Mumbai: Homebuyer affordability held steady across most major residential markets in the first half of 2026, with six of top eight cities across India remaining within the affordability threshold as lower borrowing costs continued to cushion the impact of rising property prices.

Ahmedabad remained India's most affordable housing market in the first half of 2026, with monthly loan instalments accounting for 23% of household income, followed by Kolkata at 25% and Pune at 28%, showed a Knight Frank India assessment that measures monthly loan instalments to household income, with 50% considered the affordability threshold.

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The RBI's cumulative 125 basis points of monetary easing since February 2025 has supported home loan affordability despite rising property prices. However, the Mumbai Region and the National Capital Region continued to be above that benchmark.

Home loan interest rates in India currently start at around 7.1% for borrowers with strong credit profiles.

“Housing affordability remains a key driver of residential demand. The cumulative benefit of lower interest rates continues to support homebuyers across most markets, helping sales remain close to post-pandemic highs. Over the years, affordability gains have moderated mostly due to the rise in property prices. However, healthy employment, stable incomes and supportive financing conditions continue to underpin demand,” said Shishir Baijal, International Partner, CMD, Knight Frank India.

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Among the key markets, Ahmedabad has retained its position as one of India's most affordable housing markets, supported by moderate property prices, infrastructure development and strong end-user demand.

“Ahmedabad has consistently remained an end-user-driven market where housing demand is supported by relatively affordable prices, steady economic growth and improving infrastructure. While lower interest rates have certainly helped improve affordability, the city's balanced price appreciation has ensured that homeownership remains accessible to a wider section of buyers. Going forward, sustained income growth and infrastructure-led development will be key to preserving this advantage," said Jaxay Shah, chairman, Savvy Group.

Affordability deteriorated marginally in Bengaluru, where the ratio increased to 35% from 34% in 2025, while NCR worsened to 67% from 66%. The remaining cities remained largely unchanged. MMR continued to be India's least affordable residential market with an affordability ratio of 69%, showed the Knight Frank India study.

Weighted average prices of affordable housing rose 6-18% on-year in NCR and 3-5% in MMR, while the other six cities recorded 3-8% growth.

Affordability across India's major cities had improved steadily between 2016 and 2021, aided by lower interest rates during the pandemic. The trend reversed in 2022 after the Reserve Bank of India raised the repo rate by 250 basis points to combat inflation, resulting in higher borrowing costs. Since then, rate stability and, more recently, cumulative monetary easing have helped restore affordability, even as residential prices have continued to rise.

The central bank has kept the policy repo rate unchanged at 5.25% in its February and June 2026 meetings, citing risks from the West Asia conflict, energy prices and uncertainty surrounding the monsoon. While GDP growth for 2026-27 has been revised to 6.6% and the inflation forecast raised to 5.1%, the cumulative benefit of earlier rate cuts continues to support affordability across most markets.