Ahmedabad, Kolkata, Pune are India’s most-affordable housing markets; Mumbai beyond reach: Knight Frank

Home affordability in India: The most expensive residential market in the country is Mumbai, which is the only city beyond the affordability threshold of 50 per cent. 

SUMMARY

• Ahmedabad, Pune, Kolkata are India’s most affordable housing markets
• Mumbai is beyond the affordability ratio levels; Hyderabad is expensive too
• NCR, though expensive, has improved its affordability from 2022

Home affordability in the country has improved since the pre-pandemic year of 2019, but some of the most sought-after cities are still some of the most unaffordable. For instance, Mumbai is beyond reach and Hyderabad is expensive too. On the other hand, cities like Ahmedabad and Kolkata are some of the most-affordable spaces. Delhi, the seat of power, has improved its affordability. 

According to Knight Frank India’s proprietary Affordability Index, home affordability, driven by moderation in inflation and downward trend in interest rates, should improve in 2024. According to the index, the EMI to income ratio for households has improved in 2023 after it saw a decline in 2023. 

Ahmedabad is the most affordable housing market in the country with an affordability ratio of 21 per cent. What this indicates is that an average household in Ahmedabad would need to spend 21 per cent of its household income to pay the EMI for housing loans. 

The next most-affordable housing markets are Pune and Kolkata at 24 per cent each. Kolkata jumped to the second spot after its ratio levels improved 1 per cent from 2022 and 8 per cent from 2019.

Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, “Anticipating stable GDP growth and moderation in inflation in FY 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.”

The most expensive residential market in the country is Mumbai, which is the only city beyond the affordability threshold of 50 per cent. The report stated that banks rarely underwrite a mortgage for levels beyond 50 per cent. Nevertheless, Mumbai saw an improvement of 2 per cent in its affordability index from 53 per cent in 2022 to 51 per cent in 2023. The ‘Maximum City’ also had a significant improvement of 16 per cent in its affordability levels from 67 per cent in 2019. 

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Hyderabad is the second most-expensive residential market in India, with an affordability level of 30 per cent which has remained unchanged since 2022. Home prices have seen an increase of 11 per cent in 2023. 

The National Capital Region (NCR), by no means a cheap market, has however improved on its affordability from 29 per cent in 2022 to 27 per cent in 2023. Bengaluru also remains an expensive market with an affordability level of 26 per cent in 2023, an improvement of 1 per cent from 2022 and 6 per cent from the pre-pandemic year of 2019. 

The Knight Frank Affordability Index looks into the proportion of income of a household required to fund the monthly instalment (EMI) of a housing unit in the city. An EMI/income ratio of over 50 per cent is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage.

Source – Businesstoday