Hyd 2nd Most Expensive Residential Mkt In India

Affordability plays a crucial role in sustaining homebuyer demand and driving sales, which significantly contribute to the country’s economic growth - Shishir Baijal, CMD, Knight Frank India

Hyderabad: Hyderabad emerged as the second most expensive residential market in the country yet again with an affordability index of 30 per cent, which has remained unchanged for the last three years, according to a report.

Experts say very high property prices are one of the key reasons for the Hyderabad real estate hitting slow lane in the last one year.

According to Knight Frank India’s Affordability Index which tracks the EMI (Equated Monthly Installment) to income ratio, a household in Hyderabad, on an average, needs to spend 30 per cent of its income to pay EMI for housing loan. Mumbai is the only city to exceed the affordability threshold, standing marginally higher at 50 per cent. Shishir Baijal, Chairman and Managing Director, Knight Frank India, said: “Affordability plays a crucial role in sustaining homebuyer demand and driving sales, which significantly contribute to the country’s economic growth. While property prices have seen a considerable rise, the steady increase in income levels has helped individuals maintain the financial confidence needed to invest in properties.”

In Mumbai, the affordability index improved by 17 percentage points, moving from 67 per cent in 2019 to 50 per cent in 2024. However, the affordability index of Hyderabad remained unchanged at 30 per cent for three years - 2022, 2023 and 2024.

Home affordability witnessed steady improvement from 2010 to 2021 across the eight leading cities of India, especially during the pandemic when the Reserve Bank of India (RBI) reduced repo rate (repo) to decadal lows. However, the RBI raised the repo rate by 250 basis points (bps) over nine months starting May 2022 to tackle high inflation, thus affecting affordability across cities in 2022. The EMI to income ratio in Hyderabad was at 47 per cent in 2010, followed by 34 per cent in 2019, and 31 per cent in 2020. The affordability index improved in 2021 making home purchases marginally affordable as households were expected to pay 28 per cent of their income towards EMI for buying a residential property.

Since February 2023, however repo rate has remained unchanged, while income has seen healthy growth which has helped offset rising home prices and relatively high interest rates, supporting affordability. The stable interest rate scenario is likely to persist in the near term, as the India’s economy remains on a healthy growth trajectory.

Baijal further said: “With the RBI projecting a healthy 6.6 per cent GDP growth for FY25 and a stable interest rate environment, affordability levels are expected to continue supporting homebuyer demand in 2025.”