India's major housing markets showed resilience in early 2026 as lower borrowing costs balanced out rising property prices. Knight Frank data shows six of the top eight cities remain within the affordability threshold, with Ahmedabad continuing as the most affordable market. Stable interest rates and income growth are helping sustain residential demand across these regions.
What Happened
Residential property affordability across India’s top eight cities remained stable during the first half of 2026. A report by Knight Frank India highlights that despite an increase in property prices, homebuyer affordability has been supported by favorable borrowing conditions. The study utilizes an affordability index, which measures the ratio of monthly home loan installments (EMI) to household income, with a threshold of 50% used as the benchmark for affordability. As of the first half of 2026, six of the eight major cities studied were within this limit, indicating that the cost of home ownership has not significantly outpaced household income growth for the majority of buyers.
The Most Affordable Markets
Ahmedabad continues to lead as the most affordable residential market in the country. According to the report, monthly loan installments in Ahmedabad consume only 23% of the average household income. Following this, Kolkata and Pune emerged as the next most affordable cities, with ratios of 25% and 28% respectively. Conversely, the Mumbai Metropolitan Region (MMR) and the National Capital Region (NCR) continue to report the highest ratios, at 69% and 67% respectively. These higher figures suggest that homebuyers in these specific regions face significantly higher financial strain compared to the national average.
RBI Policy and Interest Rate Impact
The current state of affordability is largely attributed to the Reserve Bank of India’s (RBI) monetary policy stance. Since February 2025, the central bank has implemented a cumulative easing of 125 basis points. This reduction in the cost of borrowing has provided a buffer for buyers, effectively neutralizing the upward pressure caused by the 3% to 18% year-on-year rise in property prices across different cities. With the policy repo rate currently held at 5.25% as of the June 2026 meeting, the stable interest rate environment continues to be a primary factor in maintaining demand near post-pandemic highs.
Challenges in Premium Markets
While the national trend points toward stability, some markets have seen a marginal decline in affordability. Bengaluru, for instance, saw its ratio move to 35% from 34%, while NCR experienced a slight increase to 67% from 66%. This deterioration is primarily linked to property price appreciation that has outpaced income growth in these hubs. The real estate sector has faced consistent pricing pressure, with developers raising prices due to increased costs for labor and construction materials, alongside strong demand for luxury and premium segments in Tier-1 cities.
What Investors Should Track
Investors and homebuyers should monitor the relationship between interest rates and property inventory in the coming quarters. The key monitorable remains the RBI's interest rate trajectory, as any reversal in policy could immediately impact EMI affordability and slow down residential demand. Furthermore, tracking the inventory levels in MMR and NCR will be essential to understanding whether price hikes can be sustained or if developers may need to adjust pricing to maintain sales velocity as affordability thresholds are tested.