Affordability of Housing Improves Across Major Indian Cities

Key Takeaways:

1. Affordability of housing has improved across major Indian cities.

2. Ahmedabad remains the most affordable housing market with an affordability ratio of 21%.

3. Mumbai, the most expensive residential market, has seen an improvement in its affordability, dropping to 51% in 2023 from 67% in 2019.

4. National Capital Region (NCR) has also seen its affordability improve to 27% in 2023 from 29% in 2022.

5. Expected moderation in inflation and a projected downward trend in interest rates should further improve home affordability in 2024.

The affordability of housing in India’s major property markets has improved, thanks to a consistent rise in income levels and improved macro-economic indicators. The study by Knight Frank India indicates that despite higher mortgage rates in the past year, the affordability level, which is the income proportion needed to cover monthly installments for an apartment, has witnessed a positive trend.

Here are the key points regarding the affordability of property prices in different cities:

1. Ahmedabad: It remains the most affordable housing market in the country with an affordability ratio of 21%. This means that only 21% of the household income is needed to pay the EMI for an average-sized house in the city.

2. Kolkata: It is in second place in terms of affordability, followed by Pune.

3. Mumbai: It is the only city beyond the affordability threshold of 50%, with an affordability index dropping to 51% in 2023 from 67% in 2019. Despite being the most expensive residential market in the country, Mumbai has seen an improvement in its affordability.

4. National Capital Region (NCR): Its affordability has improved to 27% in 2023 from 29% in 2022.

5. Hyderabad: Its affordability has improved very little due to the spurt in real estate prices in the past few years.

The study also suggests that an expected moderation in inflation and a projected downward trend in interest rates should further improve home affordability in 2024. The Chairman & Managing Director of Knight Frank India, Shishir Baijal, anticipates that stable GDP growth and moderation in inflation in 2024-25 will strengthen affordability. Additionally, if the RBI decides to lower the repo rate later in 2024, it could lead to a reduction in home loan interest rates, further enhancing the affordability of homes.

FAQ

Q1: What is the Knight Frank Affordability Index?

A1: The Knight Frank Affordability Index indicates the proportion of income that a household requires to fund the monthly installment (EMI) of a housing unit in a particular city.

Q2: How is the affordability ratio calculated?

A2: The affordability ratio is calculated based on the average household income needed to pay the EMI of a home loan for an average-sized house in the city.

Q3: Which city has the highest affordability ratio?

A3: Ahmedabad remains the most affordable housing market in the country with an affordability ratio of 21%.