It is cheapest to buy a property in Ahmedabad than anywhere else in India: Report

Affordable housing: Ahmedabad emerged as the front-runner in India's housing affordability landscape with an affordability ratio of 21 per cent. This means that, on average, households in Ahmedabad allocate just 21 per cent of their income towards housing loan EMIs. Following closely behind, Kolkata and Pune share the spotlight with a 24 per cent ratio each in 2023 according to Knight Frank. The report highlights a positive trend in home affordability across the country, signalling a rebound from a brief decline in 2022. Notably, the data reveals a substantial improvement compared to the pre-pandemic year of 2019.

High-cost housing: Mumbai and Hyderabad

Mumbai, the most expensive residential market in the country, witnessed a 2 per cent improvement in its affordability index, measuring at 51 per cent in 2023, down from 53 per cent in 2022. Despite this progress, Mumbai remains the only city beyond the affordability threshold of 50 per cent, a level at which banks rarely underwrite mortgages. However, the city has made significant strides, improving by 16 per cent since the pre-pandemic period of 2019.

Hyderabad maintains its position as the second most expensive residential market, with an unchanged affordability index of 30 per cent for both 2023 and 2022. The city faced a prolific 11 per cent increase in home prices in 2023.

Affordability uptick across cities

The National Capital Region (NCR) experienced an improvement, with the affordability index dropping from 29 per cent in 2022 to 27 per cent in 2023. In Bengaluru, the fourth most expensive market, there was a marginal 1 per cent improvement, bringing the affordability index to 26 per cent in 2023. Chennai followed suit with a 2 per cent improvement, lowering its affordability index from 27 per cent in 2022 to 25 per cent in 2023. These shifts indicate a positive trajectory in making housing more affordable in key urban centres.

Shishir Baijal, Chairperson & MD, Knight Frank India, anticipates further strengthening of affordability in FY 2024-25.

“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 notable enhancement, providing a comprehensive boost to the sector,” he said.

EMI dynamics in housing market

The Affordability Index measures the proportion of income needed to fund the monthly EMI of a housing unit in a specific city. An EMI/Income ratio above 50 per cent is considered unaffordable. The report is based on city-level averages, assuming a loan tenure of 20 years, a loan-to-value ratio of 80 per cent, and a median home loan interest rate.

The affordability Index reveals a positive shift in home affordability across major Indian cities. Ahmedabad, Kolkata, and Pune lead the charge, emerging as the most affordable residential markets. The proprietary Affordability Index, measuring the EMI to income ratio, signals a notable improvement since 2019, following a brief decline in 2022. Prospective homebuyers can expect increased affordability, marking a substantial positive change in the real estate landscape.