Middle class can’t buy homes anymore and India’s housing market is rigged to stay that way

India promises shelter for all — but in its biggest cities, affordable homes are vanishing, while luxury towers soar. The gap between what people earn and what homes cost has never been wider.

Between 2020 and 2024, India’s household income rose at just 5.4% CAGR. Property prices, by contrast, surged 9.3%, according to Finology, a wealth advisory firm. This growing mismatch is warping access to housing — not just for the poor, but increasingly for the middle class.

The market’s shift is stark. In 2022, India had 3.1 lakh affordable homes (priced under ₹1 crore). By 2024, that number had collapsed by 36% to 1.98 lakh. Simultaneously, luxury housing supply exploded — up 192% in Delhi-NCR, 187% in Bengaluru, and 127% in Chennai.

The cities hit hardest by shrinking affordability were the ones already under pressure: Hyderabad saw a 69% drop in affordable units, Mumbai 60%, and NCR 45%. Only Kolkata bucked the trend, with a 7% rise.

Two financial ratios lay bare the crisis. The price-to-income (P/I) ratio — a global measure of affordability — now averages 11 in India. That means a household needs 11 years’ income to buy a home. The accepted benchmark is 5. Mumbai leads with a staggering 14.3; Delhi clocks in at 10.1.

Then there’s the EMI-to-income (EMI/I) ratio, which tracks what portion of a household’s income goes to home loan EMIs. A ratio above 50% is considered unaffordable. India’s average stands at 61% — up sharply from 46% in 2020.

The distortions aren’t accidental. Developers frequently underreport sale prices using artificially low government circle rates, then take the remainder in cash — avoiding taxes and pushing up real prices. Black money continues to flow through these loopholes.

Simultaneously, India’s low Floor Space Index (FSI) throttles supply. Mumbai has 542 high-rises. Singapore? Over 2,600. Tokyo, New York, and even Delhi allow for much higher vertical growth.

Fixing this crisis will require deep policy reform: monthly circle rate revisions, a centralized digital platform via RERA, vacancy taxes on empty homes, and tighter controls on NRI investment. The government must also boost housing supply in tier-2 and tier-3 cities — not just metros.