Ahmedabad, Pune most affordable housing markets in 2025: Knight Frank report

The recent Knight Frank report projecting Ahmedabad, Pune, and Kolkata as India's most affordable housing markets in 2025, primarily due to lower home loan rates, offers crucial insights into the evolving dynamics of the Indian real estate sector. This trend signifies a broader improvement in housing affordability across major Indian cities, with Mumbai notably expected to fall below the 50% EMI-to-income mark for the first time. This threshold is critical as it indicates a more sustainable environment for homebuyers, where less than half of a household's income is dedicated to Equated Monthly Installments (EMIs), leaving more disposable income for other expenditures.

**Background Context and Historical Trajectory:**

India's housing market has witnessed significant transformations over the decades. Post-independence, housing was largely a government responsibility, with public sector undertakings playing a major role. The liberalization era of the 1990s opened up the sector to private players, leading to a boom in construction and a more market-driven approach. However, this growth was often accompanied by issues of transparency and affordability, especially in metropolitan areas. The early 2010s saw a period of high property prices and interest rates, making housing largely unaffordable for a significant segment of the population. The government's push for 'Housing for All by 2022' through schemes like the Pradhan Mantri Awas Yojana (PMAY), launched in 2015, aimed to address this gap, providing interest subvention and financial assistance. The Reserve Bank of India's (RBI) monetary policy, particularly the adjustment of the repo rate, directly influences home loan interest rates. A period of sustained low interest rates, often a response to economic slowdowns (like post-COVID-19 stimulus), makes borrowing cheaper and thus improves affordability.

**Key Stakeholders Involved:**

Several entities play pivotal roles in shaping housing affordability. **Homebuyers** are the direct beneficiaries of improved affordability, gaining easier access to housing finance. **Real Estate Developers** stand to benefit from increased sales volumes and renewed buyer confidence, which can spur new project launches and reduce unsold inventory. **Banks and Housing Finance Companies** are crucial as they provide the home loans; their lending policies and interest rates are directly influenced by the RBI's monetary policy decisions. **The Government (both Central and State)** acts as a regulator and facilitator through policies like PMAY, the Real Estate (Regulation and Development) Act, 2016 (RERA), and by influencing stamp duty and registration charges. **Rating agencies and research firms like Knight Frank** provide market intelligence, influencing investor and buyer sentiment. The **Reserve Bank of India (RBI)**, as the central bank, sets the benchmark interest rates (like the repo rate), which are the primary determinants of home loan costs.

**Significance for India:**

Improved housing affordability has far-reaching implications for the Indian economy and society. Economically, the real estate sector is a significant contributor to India's GDP and is a major employer, with strong backward and forward linkages to over 250 allied industries such as cement, steel, and construction materials. Increased housing demand due to affordability stimulates these sectors, leading to job creation and overall economic growth. Financially, a sustainable housing market, indicated by a healthy EMI-to-income ratio, reduces the risk of loan defaults and strengthens the balance sheets of financial institutions. Socially, access to affordable housing is fundamental to improving living standards and reducing urban poverty. It aligns with the Directive Principles of State Policy, particularly **Article 38** (State to secure a social order for the promotion of welfare of the people) and **Article 39(b)** (that the ownership and control of the material resources of the community are so distributed as best to subserve the common good), which implicitly support the state's role in ensuring basic necessities like shelter. The **Right to Life under Article 21** of the Constitution has also been interpreted by courts to include the right to shelter.

**Future Implications and Challenges:**

The projection for 2025 suggests a positive outlook for the housing market, driven by stable or lower interest rates and potentially sustained income growth. This trend could lead to increased demand in Tier-2 and Tier-3 cities like Ahmedabad and Pune, promoting more balanced regional development and reducing pressure on overcrowded megacities. It could also attract further domestic and foreign investment into the real estate sector. However, future implications are not without challenges. Sustained affordability depends on a delicate balance between property prices, income growth, and interest rates. Any significant inflationary pressure leading to higher interest rates by the RBI to curb inflation could reverse this trend. Furthermore, challenges related to urban infrastructure development, land acquisition, and regulatory hurdles (despite RERA) continue to exist. The government's continued focus on affordable housing through schemes like PMAY, coupled with prudent monetary policy by the RBI, will be critical in sustaining this positive trajectory. The long-term vision must also address the quality and sustainability of urban development, ensuring that new housing integrates with green infrastructure and smart city initiatives.

This analysis underscores that housing affordability is not merely a real estate metric but a complex indicator reflecting economic health, social welfare, and effective governance, critical for India's journey towards inclusive growth.