With interest rate cuts, Kol real estate market sees improved home affordability
Times of India | 24 December 2025
Kolkata: Of eight major cities in India, Kolkata has emerged as the most affordable housing market, with only Ahmedabad being ahead of it, a study has found.
In Knight Frank India's proprietary report, the Affordability Index, which measures the proportion of household income spent on EMIs, the affordability index of Kolkata is pegged at 22%, the same as Pune and slightly higher than that of Ahmedabad (18%). This means that just over a fifth of the annual income of buyers is spent on EMIs in Kolkata. The affordability index of Mumbai is 47%, Hyderabad's 30%, Delhi NCR's 28%, Bengaluru's 27% and Chennai's 23%.
The city's real estate market has been witnessing a significant shift in home affordability following a recent reduction in interest rates on home loans. This development is particularly impactful in a price-sensitive city like Kolkata, where even a small rise or fall in interest rates can make a huge difference to the decisions and lives of aspiring home buyers.
The KFI report showed a consistent improvement across eight major Indian cities between 2010 and 2021. Affordability strengthened further during the pandemic as RBI lowered the policy repo rate to decade-lows. However, in response to elevated inflation, RBI increased repo rate by 250 basis points over a nine-month period beginning May 2022, which led to a temporary deterioration in affordability during 2022.
Affordability index for the realty market in Kolkata has improved from 45% in 2010 to 22% now. According to the KFI data, now is the most affordable scenario in Kolkata in the past seven years, with the ratio of EMI reducing from 32% in 2019 to 30% in 2020, 25% in 2021, 24% in 2023, and 22% now.
More recently, with economic growth remaining resilient and inflation easing materially, RBI has reduced the repo rate by 125 bps since Feb, resulting in a further improvement in affordability across most housing markets. This supportive rate environment has helped residential sales sustain close to the post-pandemic peak recorded in 2024. The supportive environment is likely to continue into 2026, underpinned by the Indian economy's sustained and stable growth momentum.
The reduction in interest rates has effectively lowered the cost of borrowing, making it easier for potential homeowners to secure financing for their dream properties. This change is a boon for first-time homebuyers and those looking to upgrade their living situations, as it reduces the overall financial burden associated with purchasing a home.
Developers said Kolkata is witnessing a surge in interest from homebuyers who are eager to take advantage of the favourable lending conditions. They believe that this will particularly stimulate the affordable housing market, which is more sensitive to changes in interest levels than other segments.