India’s housing market is facing a crisis, with home ownership becoming increasingly out of reach for the middle class. Recent data by proptech platform Magicbricks reveals that the country’s average Price-to-Income (P/I) ratio has climbed to 8.8 in 2025, a significant increase from 7.5 in 2024, signalling a sharp rise in unaffordability in housing nationwide.

This means average property price in the country is 8.8 times the average annual household income. This means property prices are rising faster than household incomes, forcing families to spend a larger share of their income on buying a home. 

Across country’s national and financial capitals, the figures are much higher, with Mumbai topping the unaffordability chart with a P/I ratio of 15.1 followed by Delhi at 12.3. P/I Ratio less than or equal to 5 is considered as affordable housing option, meaning Mumbai's housing prices are three times higher than the ideal affordability threshold.

“This indicates that average families in these cities would require over a decade of income to afford a median-priced home,” the report stated.

The report attributes this unaffordability to “soaring property prices, stagnant income growth, and a market increasingly skewed towards luxury housing.”

Why has housing become unaffordable now?

A primary reason for the unaffordability is the developer preference for luxury housing. This has led to a supply crunch of affordable homes, where in the second quarter, homes under ₹50 lakh across India’s top 8 cities, dropped by 31%. In contrast, only 3% of active listings in Gurgaon and 11% in Noida being under ₹75 lakh.

“This represents a massive inventory mismatch, serving only the top 5-10% of buyers,” the report stated.

This crisis has also been aggravated by the shortage in compact housing, with only 8% of India's housing inventory under 750 sq. ft, which is considered affordable. “A 750–1000 sq. ft home in a Tier-1 city now costs ₹75 lakh to ₹1.2 crore, pushing EMIs for many households to over 50% of their income, squarely into the "extremist EMI" zone,” the report added.

Meanwhile, with a lower FSI, urban density is limited that also inflates land prices. FSI (Floor Space Index) is the ratio of a building's total floor area to the size of the plot of land it is built on. The developers as a result transfer the land cost burden to the fewer home owners.

“Coupled with speculative investments and distorted circle rates, these issues severely restrict affordable home availability. We need bold reforms to optimise land use and ensure market transparency for genuine affordability,” Prasun Kumar, chief marketing officer, Magicbricks, tells Fortune India.

How does decline in affordable housing impact individual incomes?

This has led to a phenomenon, the report, calls the “extremist EMIs” (Equated Monthly Instalments). While in an ideal scenario, EMIs should not exceed almost a third of someone’s monthly income, India's average EMI-to-income ratio surged to 61% in 2024, up 15 basis points from 46% in 2020. Additionally, while household income continued to grow at a 5.4% CAGR during 2020-2024, property price appreciation grew at a higher rate of 9.3% CAGR during the same period, eroding the middle class's financial stability.

As the country’s real estate market is estimated to reach $985.8 billion by 2030, growth is primarily expected to come from the mid-to-luxury segments. As affordable housing continues to decline, urban India is set to face a shortage of 10 million units, with an additional 25 million affordable homes needed, by 2030.