Owning property has traditionally been a cornerstone of financial security and social standing in India. It’s viewed as a long-term investment, a family legacy, and often a defining milestone of middle-class success. However, in today’s economic and policy environment, this once attainable dream is increasingly out of reach for the average Indian. Soaring property prices, coupled with stagnant income growth, have resulted in a deepening affordability crisis that disproportionately affects the middle class in urban centers.
At the heart of India’s housing crisis lies a deeply concerning Price-to-Income (P2I) ratio. According to a recent LinkedIn post by investment banker Sarthak Ahuja, the P2I ratio in major Indian metros has reached an alarming level of 11. This means that an average Indian family would need to dedicate 11 years of their entire income to buy a property. Factoring in regular expenses, it could take over 20 years of diligent saving to even come close to affording a house in cities like Mumbai, Bengaluru, or Delhi.
This ratio puts Indian urban housing in the same affordability bracket as New York City — one of the most expensive property markets in the world. The comparison is stark and unsettling, revealing just how dramatically out of sync Indian real estate has become with average income levels.
Why Property Prices Are Skyrocketing
Sarthak Ahuja identifies three key structural factors that are pushing property prices beyond reach: inefficient land-use policy, market manipulation by developers, and the infiltration of black money into the real estate ecosystem.
1. Low Floor Space Index (FSI)
India’s Floor Space Index (FSI), also referred to as Floor Area Ratio (FAR), determines how much built-up area is allowed on a given plot of land. In Indian metros, the FSI usually ranges between 1.3 to 3.5, far below global standards. By contrast, cities like New York and Singapore allow FSIs as high as 15 and 25 respectively.
A low FSI restricts vertical construction, leading to horizontal sprawl and inefficient use of scarce urban land. This artificial constraint limits housing supply and increases demand pressure on available property, causing prices to soar even further.
2. Artificial Supply Manipulation
Developers often use scarcity as a tool to manipulate market pricing. By releasing only a few units in a new project and gradually increasing the prices for subsequent releases, they create an illusion of demand outstripping supply. For instance, only 5 units might be released in a 100-unit development initially, priced at a premium. The next 5 will be even more expensive, thus anchoring high expectations in the market.
This staged release strategy results in inflated property prices that do not reflect actual affordability levels or demand fundamentals. Instead, it benefits developers at the cost of buyers, who are left chasing an ever-moving financial target.
3. Real Estate as a Safe Haven for Black Money
Perhaps the most problematic factor is the widespread use of property as a vehicle for parking unaccounted wealth. Ultra-wealthy individuals and families, many with wealth tied up in equities or liquid assets, frequently invest in high-end real estate as a means to preserve capital and avoid scrutiny.
Ahuja cites that less than 10 families own 20% of Mumbai’s land, and just 500 families control half the city’s property assets. These concentrations of wealth contribute to speculative pricing and limit the availability of affordable housing. With high-value transactions often conducted partly in cash, the entry barrier for salaried individuals becomes even higher.
The Middle-Class Dilemma
For the middle class — the largest demographic group aspiring to buy homes — the current environment presents a tough choice. Should they wait and hope for a market correction, or dive into high EMIs that strain their finances for decades?
While the Indian government has introduced initiatives like PMAY (Pradhan Mantri Awas Yojana) to promote affordable housing, the scale and scope of these interventions are limited. Urban property markets remain largely unaffordable due to land constraints, cost of construction, and speculative investor interest.
Advice for Aspiring Homeowners
Despite the grim scenario, Ahuja does not discourage people from buying homes entirely. Instead, he advocates for financially prudent homeownership. According to him, buyers should aim to fund at least 50% of the property value upfront and ensure that EMIs do not exceed 35% of their net monthly income.
This approach reduces financial stress and protects individuals from over-leveraging in a volatile market. It also encourages better saving habits and investment planning, crucial elements in building long-term financial resilience.
Government Policies and Their Shortcomings
Several government initiatives have been launched to improve property affordability:
- PMAY-Urban: Offers credit-linked subsidies for first-time home buyers, especially in the EWS and LIG categories.
- REITs (Real Estate Investment Trusts): Aim to democratize real estate investment, but are largely focused on commercial property, not residential segments.
- RERA (Real Estate Regulation and Development Act): Intended to bring transparency and accountability in the housing market. While effective in some cases, enforcement and compliance remain inconsistent.
However, these measures have not made a significant dent in high-tier urban property prices. Regulatory bottlenecks, slow project approvals, and corruption continue to hinder impactful reform.
International Comparison: What Can India Learn?
Globally, several countries have managed to tame property prices and enhance affordability:
- Singapore controls speculative demand through high stamp duties and restrictions on foreign ownership.
- Germany promotes long-term rentals through tenant-friendly laws, reducing pressure on home ownership.
- Japan maintains a high housing supply by streamlining construction approvals and allowing flexible zoning.
India could adopt similar strategies, such as relaxing FSI restrictions, cracking down on benami transactions, and improving transparency in land records. These systemic changes could gradually realign property prices with income levels.
The Psychological Cost of Owning Property
Beyond economics, there is a psychological and emotional toll associated with the housing crisis. The social expectation to own property by a certain age adds pressure, especially in urban Indian culture where renting is still perceived as temporary or inferior.
Young professionals often spend the bulk of their income servicing housing loans, compromising on quality of life, leisure, and long-term wealth creation through diversified investments. This imbalance also discourages job mobility and entrepreneurial risk-taking, since a significant portion of income is locked into immovable assets.
A Smarter Choice?
In the current climate, renting is becoming a more rational option for many. With rental yields averaging just 2–3% across Indian metros, the cost of renting is substantially lower than the cost of owning a property. Renting also offers flexibility, liquidity, and freedom from the risks associated with volatile real estate investments.
Until property prices cool or incomes catch up, renting may be the only feasible choice for those looking to balance lifestyle aspirations with financial reality.
Is There Hope?
While the current situation looks bleak, it is not irreversible. With policy reform, urban planning innovation, and greater public-private collaboration, India can still correct its property market trajectory.
Increasing the FSI, digitizing land records, incentivizing rental housing, and penalizing speculative hoarding of property could all pave the way for a healthier and more inclusive real estate ecosystem. Technology-led transparency in real estate listings, transactions, and pricing is also key to empowering buyers.
The dream of owning property in India, while still desirable, is no longer straightforward. For the middle class, the decision to buy a home today must be weighed against long-term financial health and evolving career priorities. The government, developers, and financial institutions must work collaboratively to make property ownership viable, transparent, and inclusive.
Luxury realtor and social media content creator with over 245k followers on Instagram, Snehil Yadav says – “Until then, smart saving, cautious borrowing, and renting over owning may be the best way forward in a property market that currently caters more to wealth preservation than homeownership dreams.”