What is the story about?
India’s residential real estate market is witnessing a widening affordability gap at the upper end of mass housing, with 3BHK homes—once considered a natural upgrade for urban middle-class families—fast becoming a preserve of the wealthy and investor class. A new study by proptech firm Square Yards shows that housing prices across major metropolitan markets have significantly outpaced income growth, putting sustained pressure on the affordability of larger homes.
According to the report, From Aspiration to Reality: The Cost of Owning a 3BHK in India, the average ticket size of a newly launched 3BHK across India’s top five metros now stands at ₹2.7 crore. At an annual income of roughly ₹23 lakh, a buyer would need close to 12 years of income to afford such a home—an affordability metric that is increasingly misaligned with household financial realities.
What makes the trend more striking is that even households at the cusp of India’s top 1% income bracket, estimated at around ₹22 lakh per annum, face a similar affordability horizon. This suggests that the challenge is no longer limited to middle-income buyers, but extends to upper-income segments as well.
Demand is strong, but supply is skewed
The stress on 3BHK affordability comes at a time when demand for larger homes has structurally strengthened. Post-pandemic shifts in work patterns, the need for multi-functional living spaces, and changing family dynamics have made spacious, amenity-rich homes the preferred format across metros.
However, supply-side dynamics tell a different story. The Square Yards report highlights that just 11% of new residential supply currently falls within affordable or income-aligned segments. The remaining 89% is concentrated in markets where buyers are required to stretch incomes significantly, often leading to elevated EMI burdens.
Also read: What should be your budget to buy a 3 BHK, 2BHK and studio apartment in Mumbai
Nearly 48% of all 3BHK units launched over the past year fall within stressed, severely stressed, or crisis affordability categories. These segments are typically characterised by higher prices, premium specifications, and stronger investor interest, rather than end-user affordability.
Profitability driving developer behaviour
The skew towards premium supply is not accidental. Developer economics increasingly favour higher-ticket projects, particularly in prime and emerging capital-led markets. The report estimates that developer profit margins in stressed and high-end segments range between 45–50%, compared with just 15–18% in income-aligned markets.
This margin differential has incentivised developers to focus on premium configurations, especially in cities with strong absorption and capital appreciation potential. As a result, 3BHK homes—once positioned as a mid-market product—are now increasingly priced and marketed as aspirational or luxury assets.
“The post-pandemic period has seen a sharp shift in buyer preference towards larger homes by reputed developers, but this has coincided with a surge in high-net-worth individuals and capital-driven demand,” said Tanuj Shori, Founder and CEO of Square Yards. “Together, these factors have pushed 3BHK affordability under significant stress.”
Micro-markets matter more than ever
One of the report’s key insights is the growing importance of corridor-level decision-making within cities. While headline city-level averages point to affordability stress, micro-market analysis reveals significant variation.
Bengaluru emerges as the most evenly balanced market, with income growth broadly tracking price appreciation across most corridors. In contrast, NCR and the Mumbai Metropolitan Region display sharp affordability asymmetry, where central and established micro-markets function largely as wealth-dominant or capital-parking zones.
Hyderabad, a high-growth residential market, has seen prices rise faster than incomes, pushing a majority of its residential hubs into high-stress categories. Pune, despite being a magnet for young professionals, shows a similar pattern, with wealth-dominated city cores and relatively better affordability in peripheral locations.
The report estimates that buyers who are flexible on location can save between ₹30–60 lakh by choosing emerging or peripheral corridors, where price-to-income ratios remain relatively aligned.
Affordability redefined
Square Yards assesses affordability using the price-to-income ratio (PIR), an OECD-referenced metric that measures the number of years of household income required to purchase a home. Based on this framework, markets are classified into five categories ranging from income-aligned to institutional and ultra-luxury.
The findings suggest that India’s 3BHK market is increasingly bifurcated—between capital-led markets dominated by investors and high-net-worth buyers, and emerging corridors that continue to cater to end-users.
For buyers, the implication is clear: owning a 3BHK in a mega city is no longer just a function of income, but of timing, location, and long-term financial planning. For policymakers and developers, the data raises a larger question on whether the supply pipeline is drifting too far away from the country’s evolving but still income-constrained urban demand.
According to the report, From Aspiration to Reality: The Cost of Owning a 3BHK in India, the average ticket size of a newly launched 3BHK across India’s top five metros now stands at ₹2.7 crore. At an annual income of roughly ₹23 lakh, a buyer would need close to 12 years of income to afford such a home—an affordability metric that is increasingly misaligned with household financial realities.
What makes the trend more striking is that even households at the cusp of India’s top 1% income bracket, estimated at around ₹22 lakh per annum, face a similar affordability horizon. This suggests that the challenge is no longer limited to middle-income buyers, but extends to upper-income segments as well.
Demand is strong, but supply is skewed
The stress on 3BHK affordability comes at a time when demand for larger homes has structurally strengthened. Post-pandemic shifts in work patterns, the need for multi-functional living spaces, and changing family dynamics have made spacious, amenity-rich homes the preferred format across metros.
However, supply-side dynamics tell a different story. The Square Yards report highlights that just 11% of new residential supply currently falls within affordable or income-aligned segments. The remaining 89% is concentrated in markets where buyers are required to stretch incomes significantly, often leading to elevated EMI burdens.
Also read: What should be your budget to buy a 3 BHK, 2BHK and studio apartment in Mumbai
Nearly 48% of all 3BHK units launched over the past year fall within stressed, severely stressed, or crisis affordability categories. These segments are typically characterised by higher prices, premium specifications, and stronger investor interest, rather than end-user affordability.
Profitability driving developer behaviour
The skew towards premium supply is not accidental. Developer economics increasingly favour higher-ticket projects, particularly in prime and emerging capital-led markets. The report estimates that developer profit margins in stressed and high-end segments range between 45–50%, compared with just 15–18% in income-aligned markets.
This margin differential has incentivised developers to focus on premium configurations, especially in cities with strong absorption and capital appreciation potential. As a result, 3BHK homes—once positioned as a mid-market product—are now increasingly priced and marketed as aspirational or luxury assets.
“The post-pandemic period has seen a sharp shift in buyer preference towards larger homes by reputed developers, but this has coincided with a surge in high-net-worth individuals and capital-driven demand,” said Tanuj Shori, Founder and CEO of Square Yards. “Together, these factors have pushed 3BHK affordability under significant stress.”
Micro-markets matter more than ever
One of the report’s key insights is the growing importance of corridor-level decision-making within cities. While headline city-level averages point to affordability stress, micro-market analysis reveals significant variation.
Bengaluru emerges as the most evenly balanced market, with income growth broadly tracking price appreciation across most corridors. In contrast, NCR and the Mumbai Metropolitan Region display sharp affordability asymmetry, where central and established micro-markets function largely as wealth-dominant or capital-parking zones.
Hyderabad, a high-growth residential market, has seen prices rise faster than incomes, pushing a majority of its residential hubs into high-stress categories. Pune, despite being a magnet for young professionals, shows a similar pattern, with wealth-dominated city cores and relatively better affordability in peripheral locations.
The report estimates that buyers who are flexible on location can save between ₹30–60 lakh by choosing emerging or peripheral corridors, where price-to-income ratios remain relatively aligned.
Affordability redefined
Square Yards assesses affordability using the price-to-income ratio (PIR), an OECD-referenced metric that measures the number of years of household income required to purchase a home. Based on this framework, markets are classified into five categories ranging from income-aligned to institutional and ultra-luxury.
The findings suggest that India’s 3BHK market is increasingly bifurcated—between capital-led markets dominated by investors and high-net-worth buyers, and emerging corridors that continue to cater to end-users.
For buyers, the implication is clear: owning a 3BHK in a mega city is no longer just a function of income, but of timing, location, and long-term financial planning. For policymakers and developers, the data raises a larger question on whether the supply pipeline is drifting too far away from the country’s evolving but still income-constrained urban demand.
