Affordability of housing has held in six of the top eight Indian cities, while Mumbai and the national capital region continued to lag, according to a report by Knight Frank India (Knight Frank). Ahmedabad remained the country's most affordable housing market among the top eight cities, with an affordability ratio of 23 per cent, followed by Kolkata at 25 per cent and Pune at 28 per cent. Chennai, Bengaluru and Hyderabad recorded ratios of 29 per cent, 35 per cent and 41 per cent respectively.

Knight Frank noted that housing affordability has been a key driver of residential demand and that the cumulative benefit of lower interest rates has continued to support homebuyers across most markets. The consultancy said that these conditions helped sales stay close to post-pandemic highs, although it added that affordability gains moderated over the year as property prices rose. It observed that healthy employment levels, stable incomes and supportive financing conditions continue to underpin demand.

The report recalled that affordability improved steadily between 2016 and 2021, helped by lower interest rates during the pandemic, but that the Reserve Bank of India's cumulative 250-basis-point repo rate increase between May 2022 and February 2023 eroded affordability. Stable interest rates since that period helped arrest the decline, the analysis stated, but rising residential property prices, particularly in the national capital region, have kept affordability under pressure. Knight Frank said that sustained income growth and balanced market fundamentals would be critical to maintaining housing affordability.

The consultancy expects interest rates to remain broadly stable in the near term, which should allow lower borrowing costs to continue supporting homebuyers across most markets. It added that policy stability and continued income growth are important for long-term growth in the residential market.