Haresh B. Jhala

Knight Frank data reveals ownership is becoming a privilege, not an aspiration

For decades, affordable housing symbolised the aspirations of India’s expanding middle class. Today, across Mumbai, Delhi-NCR, Bengaluru, Pune, Hyderabad, Chennai, Kolkata and Ahmedabad, that definition has quietly changed. According to the Knight Frank India H1 2026 Report, homes priced above ₹1 crore now account for more than half of all residential sales, while supply in the sub-₹50 lakh category continues to shrink. More importantly, housing affordability is no longer merely a real-estate issue—it is becoming an economic and MSME competitiveness challenge, influencing wages, talent retention and household financial stability.

Affordable Housing Ends in India’s Big Cities

The Dictionary Word: When ‘Affordable Housing’ Becomes an Aspiration

For years, “affordable housing” was regarded as the backbone of India’s urban growth story. Governments designed schemes around it, banks created dedicated mortgage products, and developers built business models targeting first-time homebuyers.

Today, in India’s eight largest residential markets, affordable housing has quietly ceased to exist as a meaningful commercial segment. It survives primarily in government policy documents and industry presentations, while the private market has steadily migrated towards premium housing.

The latest Knight Frank India H1 2026 Report confirms what many buyers have been experiencing for several years: the economics of India’s largest cities are redefining who can realistically aspire to own a home.

More importantly, this shift is no longer confined to the real-estate sector. It has become an issue for MSMEs, employers and policymakers alike, as rising housing costs increasingly influence employee salaries, labour mobility and business competitiveness.

The Market Has Already Decided Who It Is Building For

The Knight Frank India H1 2026 Report paints a picture of a market that appears stable on the surface but is undergoing a profound structural transformation.

During H1 2026, the country’s eight largest cities recorded 171,471 residential unit sales, representing only a 1% year-on-year increase. At first glance, this suggests a stable market.

However, beneath that stability lies a dramatic shift in demand.

• Homes priced above ₹1 crore accounted for 54% of total sales, compared with 49% a year earlier.
• Sales of homes priced below ₹50 lakh declined 15% year-on-year to 32,063 units.
• Developers launched 187,350 new homes, a 4% increase, but the overwhelming majority of new supply continued to favour higher-value segments.
• Unsold inventory stood at 525,695 units, representing approximately six quarters of inventory, yet prices have remained remarkably resilient.

These figures relate only to Mumbai, Delhi-NCR, Bengaluru, Pune, Hyderabad, Chennai, Kolkata and Ahmedabad. They should not be interpreted as a national verdict. Housing economics in Tier-II and Tier-III cities remain fundamentally different, where lower land costs still allow viable housing below ₹45 lakh.

The Economics Behind the Shift

The disappearance of affordable housing is not merely a pricing phenomenon. It is the outcome of several structural changes unfolding simultaneously.

Urban land prices have consistently risen faster than household incomes.

Construction costs, including steel, cement, labour, compliance and financing expenses, have increased significantly since the pandemic.

Implementation of RERA has improved market discipline but also reduced speculative launches, encouraging developers to focus on projects with stronger financial returns.

Most importantly, developers have shifted from a volume-driven strategy to a margin-driven strategy. Instead of selling larger numbers of lower-priced homes, many now prefer fewer premium units that generate healthier margins while carrying lower commercial risk.

In reality, developers are responding to market economics rather than creating them. In many metropolitan locations, the combined cost of land acquisition, approvals, finance and construction leaves very little commercial viability below the ₹45-50 lakh price point.

The Real Entry Ticket Is ₹2 Lakh Per Month

The property price is only one part of home ownership.

The real question is whether a household can comfortably sustain the monthly EMI, absorb interest-rate fluctuations and continue meeting everyday living expenses.

Using a standard assumption of 80% home finance, 20-year tenure, 8.5% interest rate, and an EMI-to-income ratio of 40%, the affordability picture changes dramatically.

Home Price	Loan Value	Approximate EMI	Minimum Household Income
₹45 lakh	₹36 lakh	₹31,000	₹77,500/month
₹80 lakh	₹64 lakh	₹55,000	₹1.37 lakh/month
₹1 crore	₹80 lakh	₹69,000	₹1.72 lakh/month

Once stamp duty, registration charges, maintenance deposits, furnishing costs and a buffer against future interest-rate increases are included, the practical threshold rises further.

The conclusion is straightforward.

A household requires approximately ₹2 lakh in monthly income to plan home ownership responsibly in these eight metropolitan markets—not merely to qualify for a bank loan.

Who Can Actually Cross That Threshold?

India does not maintain a single official database categorising households by monthly income.

However, existing datasets provide important clues.

Research based on PLFS and the World Inequality Lab indicates that an annual income of approximately ₹22 lakh, or around ₹1.83 lakh per month, places a household within India’s top 1% income bracket.

Income tax data tells a similar story.

Among approximately 8.22 crore income-tax filers, nearly 80% report annual incomes below ₹10 lakh, while only 1.4% earn more than ₹50 lakh annually.

The broader contrast is even more striking.

India’s median individual monthly income remains close to ₹9,000, while the bottom half of the population earns substantially less.

The implication is difficult to ignore.

Across India’s largest metropolitan housing markets, the pool of households capable of purchasing homes comfortably increasingly overlaps with the country’s highest-income earners.

The Missing Variable: Education Competes for the Same Budget

Housing affordability calculations generally assume the EMI is the household’s largest financial commitment.

For many urban families, that assumption no longer holds.

Education has become an equally significant expense.

Across these same metropolitan markets:

• Kidzee-type preschools charge approximately ₹50,000-90,000 annually.
• EuroKids-type schools typically charge ₹45,000-60,000, excluding daycare costs.
• Premium Montessori schools, particularly in Bengaluru, may charge close to ₹1 lakh annually even before formal schooling begins.

This translates into approximately ₹4,000-8,500 per month per child, with expenses rising sharply as children progress through primary and secondary education.

A household earning ₹2 lakh monthly therefore faces an immediate financial equation:

• Home loan EMI: approximately ₹69,000
• Education: approximately ₹8,000-15,000
• Before accounting for healthcare, transport, insurance, retirement savings or emergency expenses, nearly 40% of monthly income is already committed.

This fundamentally changes the meaning of affordability.

Today’s urban middle-class household is increasingly forced to choose between buying a better home and investing in better education.

Housing Affordability Is Now an MSME Issue

For India’s MSME sector, this trend carries consequences far beyond residential real estate.

Higher housing costs directly influence employee salary expectations, labour mobility and staff retention.

Workers unable to purchase homes often seek higher wages, relocate further from workplaces or migrate to lower-cost cities.

For MSME owners operating with limited margins, rising urban housing costs become an indirect labour-cost pressure.

Affordable housing is therefore no longer merely a social objective—it has become an important component of India’s industrial competitiveness.

Why Prices Are Unlikely to Fall

Despite inventory representing approximately six quarters of sales, significant price corrections remain unlikely.

The reason lies in inventory composition.

Much of the unsold stock consists of premium housing rather than affordable homes.

Developers are therefore reluctant to reduce headline prices because doing so immediately lowers the benchmark value of all remaining inventory.

Instead, they offer flexible payment plans, waived stamp duty, interior packages or other incentives that preserve advertised selling prices.

Land prices further reinforce this resistance.

Unlike many operating costs, urban land values establish a minimum pricing floor beneath which new developments become commercially unviable.

Interest Rates Add Another Layer of Risk

Current affordability calculations assume mortgage rates remain around 8.5%.

However, even a 100-basis-point increase in borrowing costs can materially increase monthly EMIs or extend loan tenures by several years.

This makes home ownership increasingly sensitive to monetary policy, particularly for households already stretching their finances to enter the market.

India’s Rental Market Remains the Missing Pillar

Globally, countries such as Germany, Japan and Singapore maintain well-developed rental housing ecosystems that provide a practical alternative to ownership.

India’s urban housing policy has historically prioritised ownership instead.

As a result, households priced out of home ownership frequently encounter an equally underdeveloped rental market characterised by limited institutional supply, inconsistent tenancy standards and rising rents.

The absence of a robust rental ecosystem further amplifies the affordability challenge.

The Safety Net Is Thinner Than It Appears

Government intervention offers only partial relief.

Under PMAY-U 2.0, the Middle-Income Group eligibility ceiling stands at approximately ₹9 lakh annual household income, or about ₹75,000 per month.

Ironically, this falls within the income bracket increasingly unable to purchase homes in metropolitan markets.

Funding utilisation raises additional concerns.

During FY 2024-25, only around ₹50 crore was reportedly utilised against a budget allocation of approximately ₹3,500 crore.

Meanwhile, policy studies continue to describe India’s affordable rental housing ecosystem for lower-income urban workers as underdeveloped.

Consequently, households priced out of ownership often find no equally effective alternative.

Editor’s Perspective

The latest housing numbers tell a story far larger than residential real estate.

They suggest that home ownership in India’s eight largest cities is gradually becoming the preserve of the country’s highest-income households.

For MSMEs, this matters because housing affordability directly affects the same workforce from which businesses recruit talent. Rising EMIs, escalating education costs and increasing living expenses eventually translate into higher wage expectations, lower labour mobility and greater employee financial stress.

The real concern is not simply that homes have become expensive.

The greater concern is that ownership itself is becoming exclusive.

When a city reaches a point where only its highest-income households can comfortably purchase homes, affordability ceases to be a property-market indicator and becomes an economic warning signal. It influences household consumption, labour markets, industrial competitiveness, urban productivity and the future trajectory of India’s economic growth.

In India’s eight largest cities, affordable housing has not disappeared into a government scheme—it has disappeared into an affordability gap.