Gurgaon, Dec 4: The residential segment in India has traversed through multiple troughs and crests over the past few decades in the form of several policy interventions, housing schemes and events such as Pradhan Mantri Awas Yojana program, demonetization, Real Estate (Regulation & Development) Act (RERA), Non-Banking Financial Company crisis, Special Window for Affordable and Mid-Income Housing (SWAMIH), Goods & Services Tax, etc. However, through this journey, housing sales in major residential markets of the country have remained buoyant. In fact, residential sales improved in the post-pandemic era, reaching 0.3-0.4 million units annually, supported by infrastructure development across major cities, improving affordability levels, conducive monetary policy, better transmission of repo rate changes and rising income levels.
Since 2010, average income levels have grown more than fourfold, providing a significant thrust to the affordability of home purchases. Interestingly, average income in India has grown at a CAGR of around 10%, while average housing prices have increased by 5-7%. Consequently, average affordability levels, measured by the Price-to-Income (P/I) ratio, have steadily improved from 88.5 in 2010 to 45.3 in 2025.
Although macro-level trends point towards improving average affordability levels across major cities, affordability at the city and micro market level can vary substantially and depend upon multiple factors such as local demand-supply dynamics across housing segments, project pricing, financial profile of the target demographics, etc. Also, it is important to emphasize that a change in affordability levels does not necessarily translate into housing sales across the spectrum. Demand, supply and price are closely intertwined and vary significantly at both the micro market and city level. Developers, recognizing the price sensitivity of the Indian housing market, typically offer different products & position their offerings at varying price points, based on the target segment.
“Housing sales across major Indian cities continue to remain strong, led by demand traction, favourable interest rates, and supported by a healthy increase in income levels over the last few years. While concerns over rising raw material costs continue to loom, pushing the prices upward, average income levels have increased at a higher rate compared to the average rise in property prices across most major markets. Looking ahead, steady growth in income levels coupled with likely softening of interest rates amidst low inflation, will continue to boost average housing affordability levels and support the residential market across major cities in the near-term,” said Badal Yagnik, Chief Executive Officer & Managing Director, Colliers India
Affordability levels in most Tier I cities have improved significantly since 2010;
Average affordability has improved significantly across all eight major residential markets between 2010 and 2025, as reflected by noteworthy declines in price-to-income ratios. This can be attributed to consistently higher average income levels, which cushion the impact of the rise in average housing prices to a certain extent. Cities like Ahmedabad and Hyderabad have emerged as some of the relatively affordable residential markets in the country.
Policy support & credit expansion strengthen the Indian residential market;
Regulatory reforms and conducive monetary policy have helped in improving overall housing affordability and sustaining demand across the Tier I markets. For instance, interest rates were at a historic low in the aftermath of the pandemic, supporting growth across industries and economic segments, including residential real estate. Post the cycle of increasing repo rates in the post-pandemic era, which was driven by high inflation levels and external volatilities, the benchmark lending rate has now dropped to 5.5%. Furthermore, the current low inflation levels provide an elbowroom for additional repo rate reduction in the near-term, extending the cycle of reduction in benchmark lending rates.
In addition to the conducive monetary policy, the recent GST rate rationalization of key construction materials is likely to boost homebuyer sentiments, particularly in affordable and middle-income segments.
Alongside improving housing affordability levels in the past decade, the overall credit exposure of scheduled commercial banks to the residential segment has steadily increased. This indirectly reflects sustained housing demand and strong lender confidence. Outstanding home loans have impressively surged over 10X times in the last 15 years, from INR 3 lakh crore in 2010 to more than INR 30 lakh crore in 2025. More importantly, the share of housing loans in the overall bank credit has increased from nearly 10% in 2010 to about 17% currently, underscoring the resilience of residential real estate in India.
“Sustained growth in credit deployment towards residential real estate reflects the segment’s resilience and demand momentum in the last few decades. Scheduled commercial banks have significantly increased their exposure to the housing sector, driven by strong demand fundamentals, improving average affordability levels and rising credit quality. Housing loans currently account for almost 17% of overall bank loans in the country, up from 10% in the early part of the previous decade. Overall, growing lender & institutional investor confidence, rising income levels, coupled with a strong policy push, can further improve affordability levels and boost home buying sentiment in the near-to-mid-term,” said Vimal Nadar, National Director and Head of Research, Colliers India.
Infrastructure development fuels peripheral growth; Price differential to decrease further in most Tier I Cities;
Along with improving affordability levels across Tier I cities, infrastructure development has been expanding residential catchment areas across central, suburban and peripheral locations in these cities. Moreover, as offices continue to adopt decentralized work models and move away from their dominant Central Business District (CBD) presence, housing demand has also been shifting to well-connected localities in proximity to workspaces.
The price arbitrage as of date is less pronounced in the case of cities like Ahmedabad, Bengaluru and Hyderabad, where urban growth is more balanced. Interestingly, even though housing prices in fringe localities of cities such as Delhi NCR, Mumbai and Chennai have risen significantly in the last 10-15 years amidst connectivity enhancements, the price differential between the central and peripheral locations remains significant.