“Kolkata, Chennai, and Ahmedabad are India’s most affordable cities for homebuyers, thanks to their favourable Price to Income ratio. These cities offer a balance of value, livability, and investment potential. In the future, sustainable growth and strategic planning will be key to maintaining affordability in the housing market.”
— Anurag Goel, Director, Goel Ganga Developments
When investing in a home, one of the key deciding factors is affordability. The price-to-income (P/I) Ratio is an important metric used in assessing affordability in the real estate sector. This ratio compares the median home price in a city to the median annual household income, providing insight into how many years of income an average person needs to save to buy a home. A lower P/I ratio indicates greater affordability, while a higher ratio suggests that real estate is less affordable.
Understanding the P/I Ratio
For instance, if a city has a P/I ratio of 5, then an average resident would need to save five years’ worth of their entire income to buy a home, assuming they save 100% of their income. Conversely, a city with a P/I ratio of 14.3, like Mumbai, requires an individual to save over 14 years of their income to afford a home. These factors will further depend on the locality, area and type of housing you choose.
Most Affordable Cities in India
Based on recent reports and studies, Kolkata has consistently emerged as one of the most affordable cities for homebuyers in India. It maintains a P/I ratio of around 5, making it significantly more accessible than cities like Mumbai and Delhi, which have much higher ratios.
Other cities considered affordable for housing investments are Chennai and Ahmedabad, which also have a P/I ratio of 5. These cities offer better affordability compared to the more expensive metropolitan areas like Mumbai and Delhi NCR.
Way Forward for 2025
Kolkata is expected to continue its status as the most affordable major residential market in India. Meanwhile, cities like Mumbai and Pune are projected to approach near-optimal affordability levels, driven by anticipated interest rate cuts and sustained income growth. Cities like Delhi NCR and Bengaluru are likely to see improved affordability but remain below their peak levels.
Challenges and Opportunities
Despite these positive trends, there are challenges. The luxury segment is driving price increases that can sideline first-time buyers from middle and lower-income groups. The shortage of affordable homes continues to be a significant issue in many urban centres.
When looking for the most affordable city to buy a home in India, Kolkata, Chennai, and Ahmedabad stand out due to their favourable P/I ratio and overall affordability.
