December 28, 2023: The EMI (equated monthly instalment)-to-income ratio for households in India has improved in 2023 after the brief decline in affordability in 2022, says the latest report by property brokerage firm Knight Frank. According to Knight Frank’s proprietary affordability index, housing affordability across cities also significantly improved since pre-pandemic year of 2019 while marginally better than last year.
Expected moderation in inflation and projected downward trend in interest rates should further improve home affordability in 2024, it says.
According to the report, Ahmedabad remains the most affordable housing market in the country, with an affordability ratio of 21%. This implies that a household in Ahmedabad needs to spend 21% of its household income on average to pay the EMI for housing loans. Ahmedabad was followed by Kolkata and Pune at 24% each in 2023.
Kolkata comes second on Knight Frank’s affordability index with a ratio of 24% in 2023. The ratio level of the city has improved by 1% from 2022 and by 8% from the pre-pandemic year of 2019.
Mumbai is the only city beyond the affordability threshold of 50%, a level exceeding which banks rarely underwrite a mortgage. The most expensive residential market of the country, Mumbai, has however seen an improvement of 2% in its affordability index measured at 51% in 2023 from 53% in 2022. Looking at the trend from the pre-pandemic period, the city has witnessed a significant improvement of 16% in its affordability levels from 67% in 2019.
Hyderabad is the second most expensive residential market in the country. The affordability index of the city remained unchanged at 30% for both the years of 2023 and 2022 as home prices increased by a prolific 11% in 2023.
The National Capital Region (NCR) has seen its affordability index improve to 27% in 2023 from 29% in 2022.
Bangalore is the fourth most expensive market with affordability index of 26% in 2023. The ratio of city has improved marginally by 1% since 2022 and 6% from the pre pandemic year of 2019. Affordability Index of Chennai has improved by 2% from 27% in 2022 to 25% in 2023.
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 Knight Frank Affordability Index indicates the proportion of income that a household requires to fund the EMI of a housing unit in a particular city. The index level of 40% for a city implies that on an average, households in that city need to spend 40% of their income to fund the EMI of a housing loan for a unit. An EMI/income ratio of over 50% is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage.
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An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
sunita.mishra@proptiger.com
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