Why India’s Middle Class Can’t Buy Homes Despite Higher Salaries

For India’s middle class, buying a home has traditionally been seen as the ultimate sign of financial stability. However, for younger generations today, this goal feels increasingly distant — even though salaries appear higher than in the past. Business

The issue is not simply about earning less. Instead, it reflects a deeper economic imbalance: asset prices, especially real estate, have risen far faster than salaries over the years. As a result, higher income figures have failed to translate into real purchasing power when it comes to homeownership.

Salary Growth Looks Strong, But Reality Is Different

On the surface, income growth in India appears impressive. In the early 1990s, a monthly salary of around ₹3,500 was considered reasonable. Today, median monthly earnings range between ₹27,000 and ₹29,400.

However, when adjusted for an average inflation rate of about 6% annually, ₹3,500 earned in 1990 holds nearly the same purchasing power as around ₹27,000 today. In real terms, salaries have largely kept pace with inflation, but they have not grown significantly beyond it.

This explains why many households feel financially stretched despite earning more than previous generations.

Property Prices Have Risen Much Faster Than Wages

While incomes have grown slowly, real estate prices have surged.

Housing market data shows that property prices in major metro cities such as Mumbai, Delhi NCR, and parts of Bengaluru increased by 10–11% annually between 2000 and 2020. Even at the national level, average house prices grew close to 6% per year, with sharp regional variations.

When asset prices consistently rise faster than salaries, affordability declines — making homeownership increasingly difficult for salaried households.

Income Growth Has Failed to Match Asset Inflation

India’s broader income indicators reflect the same trend. Nominal per-capita income has risen steadily over the past decade, but at a moderate pace. In dollar terms, income growth has averaged around 4–5% annually. Even in rupee terms, income growth trails the rapid appreciation seen in Tier-1 city property markets.

As a result, saving for down payments takes longer, and home loan EMIs consume a larger share of monthly income than they did for earlier generations.

Easy Credit Has Further Inflated Housing Prices

Another major factor is the expansion of credit. After global financial changes post-2008, borrowing became easier. Housing loans, consumer credit, and digital lending platforms expanded rapidly across India.

When more buyers enter the market using borrowed money, demand rises — and so do prices. This creates a cycle where easy access to debt pushes asset prices even higher, further reducing affordability for middle-class earners.

In urban housing markets, this dynamic has significantly widened the gap between incomes and home prices.

A Growing Divide Within the Middle Class

These trends have created a clear divide. Those who already own assets benefit as prices rise, seeing their wealth grow. Those who rely primarily on salaries struggle to keep up and often question why essential life goals feel increasingly unattainable.

While the pattern varies across regions, in most large cities the gap between earnings and housing costs has steadily widened. As a result, traditional ideas of financial security — especially owning a home — are being reshaped for India’s middle class.

The Bigger Picture

India’s housing affordability challenge is not just about income levels. It highlights how wealth grows in an economy where asset prices rise faster than wages. Without changes in income growth, housing supply, or credit dynamics, homeownership may remain out of reach for a large section of urban middle-class families.

Related Topics:
Business | Real Estate | Middle Class | Personal Finance | Housing Affordability

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