In a significant revelation, Knight Frank's Affordability Index has crowned Ahmedabad as India's most affordable city. The index, which gauges the equilibrium between equated monthly instalments and average household income, underscores the diverse economic landscape within Indian cities.For the initial half of 2023, Ahmedabad emerged as a frontrunner, boasting the lowest ratio among the top eight cities at 23%. Following closely are Pune and Kolkata, both registering a ratio of 26%. These ratios represent the proportion of household income directed towards EMI payments.On the contrary, Mumbai occupies the least affordable pedestal, facing a challenging ratio of 55%. The city is trailed by Hyderabad (31%) and the National Capital Region (30%).The Reserve Bank of India's (RBI) strategic response to growing inflation through benchmark repo rate hikes has impacted the affordability landscape. Since May of the previous year, the RBI's actions have led to an average 2.5% affordability decline across cities, contributing to a 14.4% increase in EMI loads. Nevertheless, the housing market's demand remains robust, sustaining its multi-year highs observed during H1 2023.Shishir Baijal, Chairman and Managing Director of Knight Frank India, lauds RBI's effective management of the inflation scenario, bolstering confidence in the country's economic environment. This positive sentiment extends to residential and office demands, which have defied global trends to remain strong.While the overall demand in the real estate sector remains high, its dynamics have undergone a shift. The mid and premium segments, encompassing prices between Rs 50 lakh to $10 mn and above $10 mn, have outperformed the market as a whole. Conversely, the under Rs 50 lakh segment has seen a decline in trends.This shift in demand dynamics is attributed to the greater sensitivity of the under Rs 50 lakh segment to rate hikes due to higher dependency on home loans. Notably, the mid-segment sales have overtaken the affordable segment, while the premium segment is catching up rapidly.Despite the ongoing strength in the market, potential interest rate hikes could create pressures on homebuyer abilities and sentiments, cautions Baijal. The resilience displayed thus far underscores the intricate balance between economic dynamics and individual affordability within the housing market.