Houses have become more affordable across the 8 biggest Indian cities; how affordable are property prices – The Economic Times

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The affordability of housing in India’s major property markets has risen, thanks to a consistent rise in income levels and improved macro-economic indicators. Despite higher mortgage rates in the past year, the affordability level, which is the income proportion needed to cover monthly instalments for an apartment, has witnessed a positive trend, according to a study by Knight Frank India.
Ahmedabad remains the most affordable housing market in the country with an affordability ratio of 21%. The number denotes the average household income needed to pay the EMI of a home loan for an average-sized house in the city. Kolkata is in second place, followed by Pune.

While only marginally better than last year, home affordability across cities has significantly improved since the prepandemic year of 2019, the Knight Frank India analysis says. Mumbai is the only city beyond the affordability threshold of 50%, a level beyond which banks rarely underwrite a mortgage. However, the most expensive residential market in the country has seen an improvement in its affordability this year. Mumbai’s affordability index dropped to 51% in 2023, down 16 percentage points from the pre-pandemic level of 67% in 2019. The National Capital Region (NCR) has also seen its affordability improve to 27% in 2023 from 29% in 2022.

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An expected moderation in inflation and projected downward trend in interest rates should further improve home affordability in 2024. “Anticipating stable GDP growth and moderation in inflation in 2024-25, affordability is expected to strengthen. Further, if the RBI decides to lower the repo rate later in 2024, as is widely expected, leading to a reduction in home loan interest rates, the affordability of homes in 2024 could see a noteworthy enhancement, providing a comprehensive boost to the sector,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.

Responding to the inflationary environment, the central bank, through six successive jumps since May 2022, raised the policy rates by a cumulative 250 basis points, taking the repo rate to 6.5%. It finally hit a pause in April last year. Home loan rates at 9% and an uptick in property prices have not impacted the housing sales activity so far and prices have also witnessed an uptick.
“While residential prices continued to rise in 2023, the improved economic and job prospects, along with a healthier income growth compared to 2022, have resulted in an improving affordability for homebuyers. The upward trajectory in inquiry levels and actual sales conversions unmistakably signals this positive trend,” said Sandeep Runwal, President, NAREDCO Maharashtra.

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Affordability on the rise
Housing affordability was high in 2023 due to the rise in incomes.

  • Ahmedabad is the most affordable among top 8 cities. Only 21% of the household income is needed to pay EMI.
  • Mumbai’s affordability has improved a lot since 2010, when it was 93%, but even 51% is not acceptable to most lenders.
  • Hyderabad’s affordability has improved very little because of the spurt in real estate prices in the past few years.
  • Prices have spurted in Delhi NCR as well, but the rise in average household income has kept affordability high at 27%.

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

If the Affordability Index of a city is 40%, it implies that a household needs to spend 40% of its monthly income to pay the EMI of a housing loan for an average unit.


EMI, house size and price/sq ft are city-level averages.


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