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Affordability, Credit Growth and Infra Boost India’s Housing Market

2025-12-04

India’s residential market has navigated multiple policy shifts and economic events over the past decades—from PMAY and RERA to the GST rollout, demonetisation, the NBFC crisis and the SWAMIH fund. Despite these fluctuations, housing sales across major markets have remained resilient, with post-pandemic demand rising to 0.3–0.4 million units annually. This growth has been supported by infrastructure development, improved affordability, favourable monetary policy and rising incomes.

Income growth has been a key pillar of affordability. Since 2010, average incomes have increased more than fourfold, rising at a CAGR of around 10 per cent, while average housing prices have grown at a slower 5–7 per cent. As a result, affordability levels—measured through the Price-to-Income (P/I) ratio—have strengthened significantly from 88.5 in 2010 to 45.3 in 2025. However, affordability varies across cities and micro markets depending on demand-supply conditions, pricing dynamics and the financial profiles of target buyers. Developers continue to position projects at multiple price points to address the Indian market’s price sensitivity.

Badal Yagnik, Chief Executive Officer and Managing Director, Colliers India, said housing sales remain strong, supported by favourable interest rates and rising incomes. He added that continued income growth and the likelihood of softer interest rates amidst low inflation will further improve affordability in the near term.

Affordability has improved across all eight major residential markets since 2010, with notable declines in P/I ratios. Ahmedabad and Hyderabad have emerged as relatively more affordable markets. Regulatory reforms and monetary measures have strengthened affordability across Tier I cities. Interest rates, which dropped to historic lows after the pandemic, have eased again following the recent cycle of repo rate increases. With the benchmark lending rate now at 5.5 per cent and inflation remaining low, there is scope for further reductions. Concurrently, GST rationalisation on key construction materials is expected to uplift buyer sentiment, particularly in the affordable and mid-income categories.

Credit deployment has also expanded in tandem with demand. Outstanding home loans have increased more than ten-fold from Rs 3 trillion in 2010 to over Rs 30 trillion in 2025. Housing loans now account for about 17 per cent of total bank credit, compared with around 10 per cent in 2010, reflecting sustained demand and stronger credit quality.

Vimal Nadar, National Director and Head of Research, Colliers India, said the steady rise in housing credit demonstrates the sector’s resilience, aided by income growth, improving affordability and greater lender confidence.

Infrastructure development is reshaping residential catchment areas across Tier I cities, expanding demand to central, suburban and peripheral locations. As offices adopt decentralised models beyond traditional CBDs, demand is increasing in well-connected residential clusters near emerging work hubs. Price differentials between central and peripheral areas remain substantial in cities such as Delhi NCR, Mumbai and Chennai, even though improved connectivity has driven strong price growth in peripheral zones. Balanced urban expansion in cities like Ahmedabad, Bengaluru and Hyderabad has resulted in less pronounced price gaps.

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