Ahmedabad is the most affordable housing market among the top eight cities in the country while the affordability of owning homes in terms of EMI to income ratio declined in the first half of 2022, according to property consultant Knight Frank India.
Knight Frank India on Friday released its Affordability Index report for H1 (January-June) 2022 that tracks the EMI (Equated Monthly Installment) to income ratio for an average household. It pointed out that affordability has been hit due to RBI’s decision to hike repo rates by 90 basis points, which prompted banks and other financial institutions to increase home loan interest rates.
Ahmedabad is the most affordable housing market amongst the top eight cities, with a ratio of 22 percent followed by Pune and Chennai at 26 percent each in the first half of the calendar year 2022, the property consultant said in a statement.
Knight Frank’s affordability index witnessed steady improvement from 2010 to 2021 across the eight leading cities especially during the pandemic when the Reserve Bank of India (RBI) cut repo rates to decadal lows.
However, with two consecutive repo rate hikes, the cumulative 90 basis points rate hikes by RBI have decreased home purchase affordability on an average by 2 percent across markets and increased EMI load by 6.97 percent.
Knight Frank India Chairman and Managing Director Shishir Baijal said home affordability has worsened in the last couple of months.
”On average affordability has decreased by 200–300 basis points across the major markets. However, despite the hike in the rates, markets remain largely affordable,” he added.
The affordability coupled with the positive change in sentiments towards home ownership would help in keeping the housing demand intact, Baijal said.
As per the data, Mumbai remains the most expensive residential market in the country. In H1 2022, the affordability index of the city increased to 56 percent from 53 percent in 2021.
Hyderabad is the second most expensive residential market in the country. In H1 2022, the affordability index of the city rose to 31 percent from 29 percent in 2021.
The Delhi-NCR market ranks third in terms of the most expensive residential market. In H1 2022, the affordability index of the city rose to 30 percent from 28 percent.
The affordability index of Bengaluru rose to 28 percent from 26 percent, while in Kolkata, the index increased to 27 percent from 25 percent.
According to the affordability index, Pune and Chennai are the second most affordable residential markets in the country.
The affordability index in Pune rose to 26 percent from 24 percent, while in Chennai, the index inched up to 26 percent in H1 2022 from 25 percent in 2021.
”Ahmedabad has consistently been the most affordable city in India since 2019,” the consultant said, adding that the affordability index of the city increased to 22 percent from 20 percent.
”In the last few years, capital values have remained stable across India or witnessed a slight increase. However, during the same period income level has increased significantly, which has resulted in improved affordability,” said Pankaj Pal, Group Executive Director, AIPL.
While there is a slight increase in the interest rate on home loans in the last couple of months, it is still below the comfortable levels of 8 percent per annum, he said, adding, ”we don’t expect any impact on affordability”.
According to Trehan Group Managing Director Saransh Trehan, affordability has been impacted slightly due to a rise in mortgage rates. ”However, housing prices, as well as home loan rates, are still attractive for both end-users and investors,” he said.