Ahmedabad most affordable housing market in India

Mumbai: In its annual proprietary study, the Affordability Index 2022, KnightFrank notes that home buying affordability levels in Indian marketshave declined in 2022 compared to 2021.

The 225 BPS cumulative increase in repo rate in 2022 and theconsequent increase in home-loan rates, along with increase inresidential prices caused the decline in affordability. However, while affordability levels in 2022 have worsened compared to 2021, they remain significantly better the pre-pandemic levels in 2019.

All markets, except Mumbai, are recorded to be well below thethreshold of comfortable affordability set at 50 per cent ratio. Ahmedabad emerged the most affordable housing market in the country with an affordability ratio of 22 per cent followed by Kolkata and Pune at 25 per cent each in 2022. Mumbai was the only one thatrecorded higher than threshold affordability ratio at 53 per cent. Affordability levels in Mumbai improved the most since 2011.

Knight Frank's proprietary Affordability Index, which tracks the EMI (Equated Monthly Instalment) to total income ratio for an average household, has shown a marginal worsening in affordability levels forthe first time in 10 years in 2022.

Affordability levels had improved even during the pandemic impacted years of 2020 and 2021 as residential price growth was subdued and thegovernment aggressively cut policy rates to increase liquidity in thehighly stressed economic environment.

Affordability index captures movement in key constituents like property prices, home loan interest rate and average household income to determine the buyers' ability to purchase a house. Banks generally underwrite home loans when the EMI to Income ratio is under 50 percent and this is deemed to be the threshold for affordability by the Affordability Index. On that account, existing income and average ticket-size metrics across seven out of eight markets make it possible for a homebuyer to easily finance their home purchase.

Shishir Baijal, Chairman and Managing Director, Knight Frank India said, "Despite the rise in REPO rate by 225 BPS in 2022 and the increase in home prices, home affordability has only marginally reduced by 100 to 200 BPS in major cities. The severity of the impact of rise in home loan rates and in prices on the affordability index has been cushioned by a rise in incomes and growth in GDP, helping the residential market maintain its momentum. This augurs well for the industry as it had been hoping for a turn around for a while. For the new year, we hope this sales momentum will continue as we expectfactors like GDP growth and inflation to remain stable."