Can Mumbai afford Mumbai: how to read the affordability index

Knight Frank's Affordability Index put MMR at 69 percent in H1 2026 and Pune at 28. Both cities are in the same state, a few hours apart by expressway, and one of them needs two and a half times the share of a household's income to carry the EMI on a typical home. That gap is the most consequential number in Maharashtra housing, and why it held steady this year is more interesting than the level.

What the index actually measures#

The index is one ratio: the EMI on a typical home in a city, divided by the typical household income in that city. Three inputs move it, and only one of them makes headlines.

• Price moves it up when homes get more expensive.
• Interest rate moves it down when borrowing gets cheaper, because the same loan costs less per month.
• Income moves it down when households earn more.

A reader who sees "affordability improved" or "affordability held" and concludes that prices fell has made the commonest mistake in Indian property commentary. Through 2025 and into 2026, the lever that moved was the second one.

The eight cities#

Two things stand out beyond the headline. Six of the eight cities sit comfortably inside the threshold, so the affordability crisis is a two-city phenomenon rather than a national one. And Pune at 28 percent is closer to Kolkata than to MMR, a few hours down the expressway, which is why the two Maharashtra markets need to be underwritten as genuinely separate places rather than as a gradient.

One reading note before you set these beside older headlines. Knight Frank revised how the index measures residential prices, now a weighted average of the price of unsold inventory in each city, which is why coverage at the end of 2025 had Mumbai below 50 percent while the H1 2026 release puts MMR at 69, unchanged from its 2025 figure on the revised basis. Compare figures only within one series; a jump between the two is the method, not the market.

The arithmetic behind the steady number#

Take a Rs 1.5 crore flat with a 20 percent deposit, so a Rs 1.2 crore loan over 20 years. Run it at a rate before the cutting cycle and at a rate available now.

The difference is about Rs 9,700 a month, or roughly Rs 23 lakh across the full term. On a household that was at the 50 percent threshold before the cuts, that alone moves the ratio by more than four percentage points.

That is the whole story of the 2026 index. The RBI cut the repo rate by a cumulative 125 basis points between February and December 2025, from 6.50 to 5.25 percent, and held it there through its August 2026 policy. Passed through repo-linked lending rates, those cuts bought enough monthly room to absorb the price rises that followed. Nothing got cheaper. Money got cheaper.

The two cities that slipped show the same mechanism from the other side. Delhi-NCR and Bengaluru worsened marginally against 2025, because prices there kept rising once the cuts had stopped.

An analogy: the index is a national average shoe size#

A city-level affordability index is useful in the way an average shoe size is useful. It tells you something real about the population and nothing at all about whether a particular shoe fits you.

The index assumes a typical home and a typical household income. Your purchase involves a specific flat at a specific price, your deposit, your income, and the rate your lender actually offers, which depends on your credit score and can vary by more than a percentage point between lenders in the same week. Use the index to understand which market you are standing in. Use your own arithmetic to decide what you can carry.

What the index leaves out#

The ratio is EMI over income, and that is a narrower thing than the cost of buying a home. Three costs sit outside it entirely, and all three fall in the first year.

The deposit. The index assumes a loan, and a loan assumes you already have the 20 percent. On a Rs 1.5 crore flat that is Rs 30 lakh of accumulated savings before the EMI starts, and for most first-time buyers it is the binding constraint rather than the monthly instalment.

Stamp duty and registration. In Maharashtra these run to several percent of the agreement value and are payable on registration day, in cash, on top of the deposit. They are not financeable and not recoverable. What they actually come to, and the four-month clock they sit inside, is in registration day at the sub-registrar.

GST on an under-construction flat. Five percent of the consideration on a non-affordable under-construction purchase, nil once the completion certificate has issued, which is a difference of lakhs between two otherwise identical flats. GST on a flat purchase sets out which side of that line a project sits on.

Add those three together and the real first-year cost of moving from renting to owning is substantially above what the index implies. That is not a criticism of the index, which measures what it says it measures. It is a reason not to read it as a budget.

What 69 percent does to a market#

An index above the underwriting threshold does not stop a market. It changes who transacts in it and how:

• More of the purchase is equity. When lenders will not stretch the EMI, buyers bridge with a larger deposit, family capital, or the sale of an existing asset. That shifts the buyer pool towards those who already own property.
• Smaller homes, further out. The typical transaction moves down the size and distance curve until the ratio works, which is the mechanism behind the growth in the outer MMR nodes rather than the core.
• The rental option gets stronger on arithmetic. When the EMI takes 69 percent of income and the gross rental yield sits near 3.8 percent, the cash comparison stops being close, which is the subject of rent or buy in Mumbai and Pune.

Priya and Arjun read the wrong number first#

Priya and Arjun, spreadsheet-minded as always, had been tracking the affordability headlines for a year and had concluded from them that 2026 was the year to buy in Pune. That conclusion was reasonable, and the reason they gave for it was wrong: they believed prices had softened.

When they rebuilt the arithmetic, the price of the flats on their shortlist had risen through the period. What had changed was the EMI on the same loan. That mattered to their decision in one specific way: they had been planning a floating rate loan at the top of their comfort band, and the realisation that their affordability was a rate position rather than a price position sent them back to size the loan against a higher rate than the one on offer. They bought the same flat with a larger deposit. Names and details in this story are illustrative.

What this means for you#

The index is a market thermometer, not a personal budget. Three ways to use it well:

1. Compare cities with it, not flats. MMR at 69 and Pune at 28 is a genuine statement about two markets.
2. Ask what moved it. An improvement from falling rates is reversible; an improvement from rising incomes is far more durable.
3. Stress your own ratio at a higher rate. If the purchase only works at the bottom of a rate cycle, that is information about the purchase.

What the index cannot tell you is anything about a specific project: whether the promoter delivers, whether the registration is current, how construction has actually progressed. That record is free on every ReraGenie project page, and the Rs 499 buyer report assembles it into the questions worth asking before you commit at any ratio.

Methodology and sources#

• Affordability Index figures for all eight cities, H1 2026, and the comparison with 2025: Knight Frank India, Affordability Index, H1 2026, on its revised price methodology (a weighted average price of each city's unsold inventory).
• Repo rate at 5.25 percent and the cumulative 125 basis points of cuts: Reserve Bank of India monetary policy decisions of February, April, June and December 2025, and the holds through August 2026.
• Illustrative lending rates: 8.45 percent is the upper end of SBI's published home loan range as of September 2026, and 9.70 percent is that rate plus the 125 basis points of cuts, the same borrower before the cycle with the cuts passed through in full. EMIs are computed on a standard amortisation formula and are arithmetic, not quotations.
• Mumbai gross rental yield near 3.8 percent: Global Property Guide, Q2 2026.
• No figure in this article comes from RERA filings, which carry no prices, rents or incomes.