Smart City Index 2025: The Housing Affordability Challenge

The Smart City Index 2025 of the IMD World Competitiveness Centre sees technology as only one aspect, along with infrastructure readiness. It further points towards what is probably the major challenge of contemporary urban existence: affordable housing. 

Housing costs in both developed and developing economies are rising well beyond incomes. In India, which is presently urbanising rapidly under its Smart Cities Mission, this issue is compounded by demographic aspects of growth, urban sprawl, and the capacity of good governance. This issue, when viewed globally, reflects deeper inequalities, speculative real estate markets, and gaps in urban planning.

Based on the Smart City Index 2025, this article will examine the crisis of housing affordability through the lens of India’s standing, comparing it to that of the global cities and exploring what steps need to be taken in order to bridge this widening divide.

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The Smart City Index 2025: An Overview-

• The IMD World Competitiveness Centre, together with Singapore University of Technology and Design (SUTD), released the Smart City Index 2025.
• It has been published continuously since 2019; this is its sixth edition.
• The extent to which cities combine economic growth with technology adoption, governance, sustainability, and quality of life.
• Evaluates 118 cities around the world from the perspectives of infrastructure, environment, health, education, and other things people feel they need more of.
• The issue of housing affordability in 2025 became an all-encompassing theme that affected cities scoring highest and lowest on the ranking.

Top 10 Smart Cities in Smart City Index 2025-

Rank 2025	City	Country	Rating	Rank 2024	Change
1	Zurich	Switzerland	AAA	1	—
2	Oslo	Norway	AAA	2	—
3	Geneva	Switzerland	AAA	4	▲1
4	Dubai	UAE	A	12	▲8
5	Abu Dhabi	UAE	A	10	▲5
6	London	United Kingdom	AA	8	▲2
7	Copenhagen	Denmark	AAA	6	▼1
8	Canberra	Australia	AAA	3	▼5
9	Singapore	Singapore	AAA	5	▼4
10	Lausanne	Switzerland	AAA	7	▼3

Indian Cities Rank in the Smart City Index 2025-

City	Rating	Rank 2025	Rank 2024	Change
Delhi	CC	104	106	▲2
Mumbai	CC	106	107	▲1
Hyderabad	CCC	109	111	▲2
Bengaluru	CC	110	109	▼1

Smart Cities Mission in India has been vigorously implemented in 100 cities since 2015. Sadly, one huge hurdle to the success of the program has been the issue of housing affordability.

• Informal Settlements for the Urban Poor: Over 35% of the urban population in India lives in slums or unlawful colonies.

• Speculative real estate markets: Unchecked growth in land prices allows cities like Mumbai, Bengaluru, and Delhi to experience an increasing shift of affordable housing from city centres.

• Income Disparity: There Oftentimes Lie Large Sections of the Populous Middle Class Excluded from Entering the Formal Housing Market.

Smart City Index Findings for India:

• The larger towns of Mumbai, Delhi, and Bengaluru would rank mid to low, mainly due to affordability metrics, which drag their scores down.
• Smaller cities like Pune, Surat, and Ahmedabad mostly manage to secure comparatively higher ratings by virtue of their affordability, even though they are facing increasing pressure.
• The Index mentions that India must push housing affordability up the list of priorities, along with digital infrastructure, to realise its vision of Smart Cities.

Why Housing Affordability Matters in Smart Cities-

• A city may invest in a 5G network, an AI traffic management system, or a green infrastructure, but its smartness is not complete if its citizens cannot afford decent living conditions.
• Key aspects of housing affordability are as follows:
• Socially, Affordable housing reduces inequality, keeps urban slums down, and improves the quality of life. 
• Economic competitiveness: High rental prices drive out talented employees, and their output and innovativeness suffer because of it.
• An inclusive urban environment teaches multi-dimensionality: A smart city will not serve only the rich but also the broad masses. 
• Sustainable, inexpensive housing paired with green design indeed eases the stress on the environment.

Global Housing Affordability Trends-

The Smart City Index 2025 reveals a shared global struggle:

High-Cost Developed Economies:

• Singapore tops the Smart City Index overall, but has done very poorly in the fight against skyrocketing housing prices. Government subsidies and public housing schemes alleviate part of the burden, but affordability is painfully under pressure.
• Housing is ranked quite high in terms of technology, yet it remains among the most expensive markets in the world, with rent in some instances taking up more than 70% of income.
• New York-San Francisco aus USA: Tech-driven demand raises housing prices, leading to an exodus to secondary cities.

Europe:

• Zurich, Copenhagen, and Amsterdam: Well rated in sustainability, with affordability now at risk from high demand and scarcity of land.
• Berlin tried with rent freezes and rental caps, which are now legally and politically contested.

Emerging Countries:

• China – Shanghai, Shenzhen, and Beijing are the foremost smart cities in technology, but increasing affordability gaps from speculative real estate bubbles.
• Latin America (São Paulo, Mexico City) – Stumbling blocks to very high smart initiatives are high inequality and slums.
• Middle East (Dubai, Riyadh) – Advanced, ambitious smart projects without a corresponding affordability level for local and migrant populations.

The Housing Affordability Index: Alarming Numbers-

There is a growing difference in income growth and housing prices, IMD notes. It was found that houses in major metros in India almost grown at a rate of 15% per annum, while wage growth has been around 5-6% and averages.

Housing affordability has worsened for more than 70% of cities surveyed across Europe since 2020.

In North America, with all things considered, as a generation, millennials spend somewhere between 45-60% of their disposable income on rent or mortgage payments. Such a condition makes it difficult to save money, as well as reduces mobility.

Policy Responses and Innovations-

Smart City Index 2025 gives a bird ‘bird’s-eye view of all strategies being adopted in the world:

India:

• Pradhan Mantri Awas Yojana (PMAY): It provides the target of housing for all today. However, there is a lag in the execution of this plan.
• Public-private partnerships (PPPs): It has been implemented in mass housing projects in the states of Gujarat and Maharashtra.
• Transit-oriented development (TOD): Linking affordable homes with metro corridors in Delhi and Bangalore.

Global Illustrations:

• Singapore: Housing and Development Board (HDB) flats provide subsidised homes to 80% of citizens.
• Vienna, Austria: For over 60% of the population, rent remains stable in social housing.
• Barcelona, Spain: Imposing taxation on vacant units with a view to incentivising owners to rent those unused units. 

Inclusionary zoning laws in Canada require developers to construct a proportion of their project as affordable housing in order to ensure the availability of such housing.

Smart Thinking Housing Solutions-

Under consideration in terms of making housing affordable, aligning with smart city design principles are the following innovations: 

• Green Affordable Housing:energy-efficient, sustainable materials, to minimise operational long-term costs. Al Technology in the housing-allotment system- AI-based platforms to regulate availability, demand, and pricing. 
• Co-living and Micro Apartments: Emerging alternatives for the younger professionals. Blockchain in real estate- Charting out the path to minimise fraud and increase transparency in land records and housing distribution.

Conclusion-

The Smart City Index 2025 notes that a city cannot be smart if it is expensive. The issue of housing affordability is secondary no longer, but is now at the centre of competitiveness, sustainability, and livability in urban centres.

The Smart Cities Mission in India and the international case studies show that the challenge is quite daunting but still up for the taking. With policy innovation, technology integration, and inclusive planning, cities are set to achieve the ideal balance between modern infrastructure and the fulfilment of a basic right to affordable housing.

It is a universal lesson: smartness must mean accessibility, inclusivity, and livability, not technology alone.

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