Looking For Home? Know Which City Is Most Affordable In India

Even as the real estate market is seeing an uptick after two years of lull due to the coronavirus pandemic, demand for housing has been on the rise for the past few months. A report by realty consultancy firm Knight Frank showed that Ahmedabad is the most affordable housing market among the top-eight cities, with an EMI-to-income ratio of 22 per cent, followed by Pune and Chennai at 26 per cent each in the first half of the calendar year 2022.

It, however, added that all markets have seen a decline in affordability due to the recent rise in home loan rates as a result of the 90 bps rise in the repo rate.

“The Affordability Index, which tracks the EMI (equated-monthly instalment)-to-income ratio for an average household, witnessed a steady improvement from 2010 to 2021 across eight leading cities of India, 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 bps (basis points) rate hikes by RBI have decreased home purchase affordability on an average by 2 per cent across markets and increased EMI load by 6.97 per cent,” Knight Frank said in a statement on Friday.

Shishir Baijal, chairman and managing director of Knight Frank India, said the home affordability, due to the rise in home loan rates, has worsened in the past couple of months. On an average, affordability has decreased by 200-300 basis points across the major markets.

“However, despite the hike in the rates, markets remain largely affordable. This, coupled with the positive change in sentiments towards home ownership, we expect demand to remain unhindered with the momentum backed by the latent demand in the market continuing. Further, factors like strong economic growth outlook, financial stability and job security, the purchasing capabilities of potential buyers are expected to remain intact,” Baijal added.

To control inflation, the Reserve Bank of India (RBI) in early June raised the key repo rate by 50 basis points (bps), which was the second hike within almost as month after the central bank’s Monetary Policy Committee increased 40 basis points in off-cycle policy review in May. The retail inflation in May stood at 7.04 per cent, which is higher than the RBI’s target limit of 2-6 per cent.

City-Wise Affordability

Mumbai: The city remains the most expensive residential market in the country. From 93 per cent in 2010, the home purchase affordability index improved to 66 per cnet in 2019. With the advent of the pandemic in early 2020, the affordability index further improved to 61 per cent in 2020 and again to 53 per cent in 2021. In H1 2022, the affordability index of the city currently stands at 56 per cent, according to Knight Frank.

Hyderabad: The city is the second-most expensive residential market in the country. From 47 per cent in 2010, the home purchase affordability index improved to 33 per cent in 2019. In H1 2022, the affordability index of the city currently stands at 31 per cent.

NCR: It ranks third in terms of most expensive residential market in the country during H1 2022. From 53 per cent in 2010, the home purchase affordability index improved to 34 per cent in 2019. In H1 2022, the affordability index of the city currently stands at 30 per cent.

Bengaluru: The city follows NCR in terms of expensive residential markets in the country, ranking 4th expensive city in India. From 48 per cent in 2010, the home purchase affordability index improved to 32 per cent in 2019. In H1 2022, the affordability index of the city currently stands at 28 per cent.

Kolkata: Kolkata ranks third most affordable residential market in the country. From 45 per cent in 2010, the home purchase affordability index improved to 31 per cent in 2019. In H1 2022, the affordability index of the city currently stands at 27 per cent.

Pune and Chennai: These two cities are the second most affordable residential markets in the country. From 39 per cent in 2010, Pune’s home purchase affordability index improved to 28 per cent in 2019. In H1 2022, its affordability index currently stands at 26 per cent. Chennai: From 51 per cent in 2010, the home purchase affordability index improved to 29 per cent in 2019. In H1 2022, the affordability index of the city currently stands at 26 per cent.

Ahmedabad: It has consistently been the most affordable city in India since 2019. From 46 per in 2010, the home purchase affordability index improved to 25 per cent in 2019. With the advent of the pandemic in early 2020, the affordability index further improved to 24 per cent in 2020 and again to 20 per cent in 2021. In H1 2022, the affordability index of the city currently stands at 22 per cent.