As the world sinks into housing anxiety, why are India's first-tier cities becoming more affordable for homebuyers?

Major cities around the world are being engulfed by a housing affordability crisis: from London to Toronto, from Melbourne to Seoul, more and more people find that even working for a lifetime can hardly earn them a decent apartment. Yet in another economy once widely regarded as having cramped living conditions—India—a report offers an almost counterintuitive picture: over the past fifteen years, average housing affordability in first-tier cities has not worsened, but has actually improved significantly.

Not by falling home prices, but by income running faster

Data released by Colliers in December 2025 shows that the price-to-income ratio (P/I ratio) of India's eight major residential markets has fallen from 88.5 in 2010 to 45.3 in 2025. This indicator measures how many years of annual income a resident needs to buy a home at the average housing price; the higher the value, the heavier the burden.

If one looks only at housing prices, many people's first reaction may be confusion. After all, housing prices in India's big cities have never stopped rising. But the key to the shift in affordability is that income growth has clearly outpaced housing prices. Over the past fifteen years, India's average income has grown at a compound annual rate of about 10%, more than quadrupling; over the same period, average housing prices rose at a compound annual rate of roughly 5% to 7%. The gap between income growth and housing price growth—about three percentage points—has gradually absorbed housing affordability pressure year by year.

This result is not merely a byproduct of India's uniquely high economic growth. It reveals a deeper structural phenomenon: in the absence of explosive currency depreciation or a housing market crash, if residents' incomes grow faster than property appreciation over the long term, housing affordability will gradually return to a relatively healthy range. Compared with an adjustment path that relies on a sharp drop in housing prices to achieve affordability, India's situation is clearly more socially stable.

Policy, credit, and institutions: three pillars giving demand purchasing power

Housing affordability improvements rarely rely on the economic cycle alone. Over the past fifteen years, India has just experienced a dense wave of housing institutional upgrades.

From the Pradhan Mantri Awas Yojana (PMAY) housing scheme, to the Real Estate (Regulation & Development) Act (RERA) imposing constraints on off-plan project deliveries and developer behavior, to the Goods and Services Tax (GST) unifying tax rates and recent rationalization adjustments on key construction materials, the entire policy system is shifting from stimulating home purchases to building a credible housing market. Meanwhile, after regulators curbed inflation, the benchmark repo rate fell to 5.5%, and slowing inflation has left room for further easing, directly lowering the cost of home purchase loans.Echoing the policy was the rapid expansion of credit. According to data from India's commercial banking system cited by Colliers, the outstanding housing loan balance of Indian commercial banks surged from about 3 trillion rupees to more than 30 trillion rupees in fifteen years. The share of housing loans in total bank lending rose from 10% to 17%. The growth in credit not only reflects the maturation of the mortgage market, but also shows that banks have begun to believe in the long-term solvency of middle-class households. In many emerging markets, the depth of residential credit is often the ceiling on whether housing improvements can be realized.

Urban Spatial Restructuring: Infrastructure Turns "Affordable but Far" into "Within Reach"

Beyond macroeconomic indicators, the residential landscape within India's first-tier cities is also shifting. The traditional central business district (CBD) is no longer the sole anchor for work. As companies adopt more flexible working models, housing demand is flowing toward suburbs and secondary locations with good infrastructure connections. The expansion of roads, suburban rail, and municipal boundaries has brought locations previously considered unreachable into commuting range, while also creating more choices for different income groups.

Ahmedabad and Hyderabad therefore show relatively higher overall affordability. Such cities have not simply repeated the existing high-pressure inventory logic of Delhi or Mumbai, but through more balanced urban expansion, have synchronized new-district growth with infill development in established urban areas. For developers, price-sensitive lower-tier markets have instead become an important source supporting the sales base. Infrastructure-driven peripheral growth is compressing the price gap between traditional main urban areas and suburbs, and making the affordability disparity within a single city less extreme than before.

Structural Improvement Does Not Mean Everything Is Fine

But if one concludes from this that India's housing problems are being comprehensively solved, that would be overly optimistic. Colliers reminds in its report that an overall improvement in affordability does not mean all groups benefit. The real market consists of micro-level individual cases; project pricing, local supply and demand, and the financial conditions of target customers can cause huge variation in actual experience within the same city. The market faced by a high-income software engineer and that faced by a small business owner may be almost two parallel worlds.

In addition, risks still lurk on the right side of macro data: pressure from construction raw material prices may turn into higher home prices; if future income growth slows or interest rates move upward again, the sustainability of household leverage will be tested. The report notes that developers offering multi-tiered products for different groups itself shows that the market is still continuously matching supply with demand, and such matching also requires sustained support from economic fundamentals.

The Indian Sample in a Global Context

For global urban policymakers, what India has demonstrated over the past fifteen years is not a single standard answer, but a combination path that may have been overlooked: rather than pinning housing affordability on falling home prices, or relying solely on government-built housing, it has enabled income growth, credit deepening, institutional transparency, and infrastructure expansion to happen simultaneously. This requires a longer cycle, as well as a balance among welfare, financial stability, and investment potential.<SEGMENT id="0">While most cities around the world are troubled by worsening affordability, a large developing country has instead improved homebuying conditions over a medium-to-long-term window. That may not prove that the Indian model is perfect, but it is enough to remind global real estate analysts that housing affordability is not a static ledger but the result of the combined effects of policy and time.</SEGMENT>