Buying a home is more than just a financial decision; it's an emotional one. It’s where memories are built, and dreams take shape. However, for many families, this dream seems distant due to high property prices and financial constraints. Thankfully, in 2025, the dream of homeownership has become more achievable, particularly in Ahmedabad.

According to the latest Affordability Index by Knight Frank India, Ahmedabad stands out as the most affordable city for homebuyers in India in 2025. The city leads with an affordability ratio of just 18%, meaning that homebuyers spend only 18% of their average income on home loan EMIs, which is well below the 40% affordability limit. This makes Ahmedabad the most budget-friendly major city for homeownership, offering great value for buyers. Following Ahmedabad, Pune comes second with a slightly higher affordability ratio of 22%, followed by Kolkata at 23%. These cities continue to provide significant affordability advantages compared to other metros in India.

Lower Interest Rates and Their Impact on Affordability

A key factor driving the improved affordability in Ahmedabad and other cities is the Reserve Bank of India’s (RBI) decision to cut the repo rate by 100 basis points since February 2025. This reduction in interest rates has helped lower the monthly EMIs for home loans, making it easier for homebuyers to afford property. The first half of 2025 saw a steady improvement in affordability across most cities, thanks to this positive shift in the interest rate environment.

Notably, Mumbai, which has long been one of the least affordable housing markets in India, also saw an improvement. For the first time, Mumbai's affordability ratio dropped below the 50% mark to 48%. Although still higher than other cities, this marks the most affordable period in recent years for Mumbai’s housing market.

Challenges in NCR and the Rest of India

While affordability has improved across many regions, the National Capital Region (NCR) has seen a slight decline in affordability. Buyers in NCR now spend 28% of their income on housing, up from earlier levels. This increase is attributed to rising residential property prices, which have partially offset the benefits of lower interest rates.

Shishir Baijal, Chairman and Managing Director of Knight Frank India, emphasized the importance of affordability in maintaining homebuyer demand and sustaining sales momentum. He pointed out that growing household incomes and stable economic conditions have created a favorable environment for potential homeowners. Baijal also noted that India’s projected GDP growth of 6.5% for FY 2026, combined with the RBI’s supportive interest rate policies, would likely keep affordability levels healthy throughout 2025.

Macroeconomic Support for Homebuyers

The RBI’s policies, including a neutral stance on policy rates and a cut in the Cash Reserve Ratio (CRR), have significantly improved liquidity in the banking system. This has made it easier for banks to lend, reducing borrowing costs for homebuyers and developers alike. Furthermore, inflation has remained under control, salaries are increasing steadily, and the overall economic environment is improving, all of which contribute to better affordability for homebuyers. As a result, 2025 presents some of the best affordability levels in recent years. With lower interest rates, stable income growth, and a recovering housing market, more people are now able to consider homeownership as a viable option.

Cities to Watch for Affordable Homeownership

For anyone planning to buy a home in 2025, cities like Ahmedabad, Pune, and Kolkata offer the most attractive affordability conditions. Whether you’re a first-time buyer or someone looking to invest in property, these cities provide a great opportunity to enter the housing market with more manageable costs. As affordability continues to improve, driven by lower interest rates and positive macroeconomic factors, more individuals and families will have the chance to make their dream of homeownership a reality.

Note: This article is for informative and educational purposes only, this is not financial advice.