Metro housing squeeze: Rising home prices push 3BHK ownership beyond reach in major cities, says report

Affordability of 3BHK homes across India’s major metropolitan markets is coming under increasing strain as residential prices continue to rise faster than household incomes, pushing ownership of larger homes beyond the reach of the average buyer, according to a new report by proptech firm Square Yards.

The report, From Aspiration to Reality: The Cost of Owning a 3BHK in India, highlights that while demand for spacious, amenity-rich homes has surged in recent years, affordability pressures have intensified due to escalating property prices, higher land and construction costs, and a supply skew towards premium housing segments. Changing family structures, greater work-from-home adoption and a preference for future-ready homes have all contributed to stronger demand for 3BHK configurations, particularly among affluent buyers.

Rising house costs

However, the study finds that the average cost of a new 3BHK across India’s top five metropolitan cities has risen to about Rs 2.7 crore. At an annual income of roughly Rs 23 lakh, a buyer would need close to 12 years of income to afford such a home, underscoring the widening gap between earnings and housing costs. Even households earning around Rs 22 lakh per year, broadly considered the income threshold for India’s top 1%, face a similar affordability horizon in these markets.

Using an OECD-referenced price-to-income ratio (PIR) framework, the report classifies housing markets into five affordability categories: income-aligned, income-stretched, capital-led, wealth-dominant, and institutional or ultra-luxury. A PIR of 3–5 is considered sustainable, while ratios above 10 indicate rising affordability stress. The analysis shows that just 11% of new 3BHK supply currently falls within income-aligned, affordable markets. In contrast, 41% of supply lies in income-stretched markets where financial pressure on buyers is significant, and a further 48% is concentrated in stressed, severely stressed or crisis categories.

Profit margins

The report noted that this imbalance is partly driven by developer incentives. Profit margins in premium, wealth-dominant and institutional segments range between 45% and 50%, compared with 15–18% in affordable or income-aligned markets. As a result, new supply has increasingly gravitated towards higher-priced homes that deliver better returns, even as affordability deteriorates for end users.

Trends in major markets

The report also highlights stark differences across cities and micro-markets. Bengaluru emerges as the most balanced metro, with relatively stable affordability across corridors as income growth has broadly kept pace with price appreciation. In contrast, the Mumbai Metropolitan Region (MMR) and the National Capital Region (NCR) display sharp corridor-level asymmetry, making micro-market selection critical for buyers. Hyderabad, despite being a high-growth market, has seen prices outstrip income growth, pushing most residential hubs into high-stress zones. Pune’s city cores have become wealth-dominant markets, forcing many buyers to consider peripheral locations to afford a 3BHK.

According to the study, choosing the right location within a city can translate into savings of Rs 30–60 lakh, as central and premium areas increasingly function as capital-parking or wealth-dominant markets, while emerging and peripheral corridors offer a better bridge between aspiration and ownership.

The findings are based on an analysis of 10,500 RERA-registered 3BHK units launched during 2024–25 across 44 micro-markets in Bengaluru, Hyderabad, MMR, NCR and Pune. The report provides a structured playbook for different buyer cohorts, including first-time buyers, upgraders and high-net-worth individuals.

“India’s residential market is witnessing a sharp affordability imbalance,” said Tanuj Shori, Founder and CEO of Square Yards. “A post-pandemic shift towards larger, amenity-rich homes, combined with a rise in high-net-worth individuals and strong developer focus on premium supply, has pushed 3BHK affordability under significant stress.”