For average buyers living in India's major metropolitan areas, purchasing a 3BHK home is becoming a significant challenge. According to the latest report by Square Yards titled 'From Aspiration to Reality: The Cost of Owning a 3BHK in India', residential property prices are escalating at a much faster rate than family incomes, making larger homes increasingly out of reach for the common person.
The report's startling figures reveal that the average price of a new 3BHK home in India's top five metros has now surged to approximately 27 million INR. Even if an individual's annual income is about 2.3 million INR, they would need to allocate their entire earnings for 12 years to buy this home. This statistic highlights the deepening chasm between income and the rising cost of housing. Even families with an annual income of 2.2 million INR, falling within the top 1% of the population, find that purchasing a home in these cities has become economically burdensome.
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How Home Prices Have Skyrocketed
The report classifies the Indian housing market based on economic standards, suggesting that home prices should ideally be 3 to 5 times the annual income. However, this ratio has soared past 10 in major Indian cities, signaling severe economic distress. The analysis shows that only 11% of the new 3BHK homes available in the market align with the average person's income.
The worsening balance of supply and demand is concerning, as 89% of the homes in the market exert significant financial pressure on buyers. According to the report, 41% of the supply falls into the 'income-stretched' category, while 48% has reached the 'severe distress' or 'crisis' category. Developers are now more focused on the premium and luxury segments rather than the middle class, leading to a considerable shortage of affordable large homes. The work-from-home trend and the needs of large families have increased the demand for 3BHKs, but the rising costs have put them out of the reach of the middle class.
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Profit Margins
The report identifies builders' profit motives as a major cause of this market imbalance. Builders see hefty profits of 45% to 50% in luxury and expensive housing projects, whereas profits drop to just 15% to 18% in affordable housing. This has led builders to favor high-margin projects, making it increasingly difficult for the average buyer to afford homes.
Trends in Major Markets
The report clearly juxtaposes the disparities between different cities and areas. Bangalore has emerged as the most balanced market, with the rise in both incomes and property prices being almost even, making home buying still feasible. In contrast, Mumbai (MMR) and Delhi-NCR present complex scenarios, where there is a vast disparity in prices between different areas of the same city. This makes choosing the right and affordable area a significant challenge for buyers.
Hyderabad has advanced rapidly, but property prices have outpaced incomes, resulting in many residential areas becoming unaffordable for the average buyer. In Pune, city center properties have become so expensive that they are now only accessible to the extremely wealthy. Buyers seeking 3BHK homes on a modest budget must now look toward the outskirts of Pune.
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Choosing the Right Location Can Save Lakhs
The report suggests that selecting the right area within a city can lead to savings ranging from 3 to 6 million INR. City-center premium areas are now merely places for investment or for the wealthy to reside, whereas the city's outskirts and newly developing areas present better options for those aspiring to own their home.
This conclusion is based on the analysis of 10,500 RERA-registered 3BHK units launched during 2024-25 across 44 areas in Bangalore, Hyderabad, Mumbai (MMR), Delhi-NCR, and Pune. The report serves as a guide for first-time homebuyers, those upgrading their homes, and affluent investors alike.
Square Yards Founder and CEO, Tanuj Shori, stated, "A significant imbalance between home prices and purchasing power has emerged in India's residential market. The pandemic increased desires for larger homes with modern amenities. Simultaneously, the growing number of wealthy individuals and builders' focus on premium projects have made purchasing 3BHK homes exceedingly stressful and challenging for the common person."
