All housing markets in India have experienced a decline in affordability as a result of the recent increase in house loan interest rates, all as a result of the 90 bps increase in repo rates from the central bank, shows a recent report from the real estate agency Knight Frank India.
According to Knight Frank India’s Affordability Index for H1 2022, Ahmedabad has the most affordable housing among the top eight cities, with a ratio of 22 per cent, followed by Pune and Chennai, each with a ratio of 26 per cent in the first half of the year 2022.
The eight largest cities in India showed continual improvement between 2010 and 2021. This was especially true when the Reserve Bank of India (RBI) dropped repo rates to record-low levels during the pandemic. The report’s results show that after two consecutive rate increases for repo, the RBI’s total 90 bps rate rises have increased borrowing costs by 6.97 per cent and decreased affordability for home purchases by an average of 2 per cent across markets.
Knight Frank India’s Chairman and Managing Director, Shishir Baijal, while remarking on the same, said, “The home affordability, due to the rise in home loan rates by 90 BPS, has worsened in the last couple of months. On 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 continues. Further, factors like strong economic growth outlook, financial stability and job security, the purchasing capabilities of potential buyers are expected to remain intact.”
Here is how the cities fared:
Mumbai
The city continues to have the most expensive housing market in the nation. The affordability index for buying a home improved from 93 per cent in 2010 to 66 per cent in 2019. The affordability index improved when the pandemic began in early 2020, reaching a high of 61 per cent in 2020 and then falling back to 53 per cent in 2021. The city’s affordability index stands at 56 per cent as of H1 2022.
Hyderabad
Moving forward, the residential market in Hyderabad is the second costliest in the nation. The affordability index for house purchases improved to 33 per cent in 2019 from 47 per cent in 2010. The affordability index improved when the pandemic began in early 2020, reaching 31 per cent in 2020 and then 29 per cent in 2021. The city’s affordability index currently stands at 31 per cent as of H1 2022.
Delhi NCR
In terms of the most expensive residential market in the nation for H1 2022, NCR occupied the third position in the country. The city’s affordability index varies from year to year. The affordability index for buying a property in the national capital improved to 34 per cent in 2019 from 53 per cent in 2010. The affordability index dropped to 38 per cent in 2020 due to the pandemic’s onset in early 2020, although it recovered to 28 per cent in 2021. The city’s affordability index is at 30 per cent as of H1 2022.
Bengaluru
Bengaluru, which is ranked as India’s fourth most costly city, follows NCR in terms of the nation’s priciest residential markets. The affordability index for buying a property in the Silicon Valley of India improved from about 48 per cent in 2010 to 32 per cent in 2019. After the pandemic started in early 2020, the affordability index continued to rise, reaching 28 per cent in 2020 and then 26 per cent in 2021. The city’s affordability index is now at 28 per cent, as of H1 2022.
Kolkata
The third most affordable residential market in the nation is Kolkata. The affordability index for buying a property in the Bengal capital improved from about 45 per cent in 2010 to 31 per cent in 2019. The affordability index improved significantly when the pandemic began in early 2020, reaching 30 per cent in 2020 and then 25 per cent in 2021. Kolkata’s affordability index is now at 27 per cent as of H1 2022.
Pune
Pune and Chennai rank as the second most affordable residential markets in the nation, per the affordability index. The affordability index for buying a property in Pune improved from 39 per cent in 2010 to 28 per cent in 2019. The affordability index improved when the epidemic began in early 2020, reaching 26 per cent in 2020 and then 24 per cent in 2021. Pune’s affordability index currently stands at 26 per cent as of H1 2022.
Chennai
In Chennai, the affordability index for buying a property improved from 51 per cent in 2010 to 29 per cent in 2019. When the pandemic started in early 2020, the affordability index continued to rise, reaching 26 per cent in 2020 and then 25 per cent in 2021. The city’s affordability index is now at 26 per cent, as of H1 2022.
