The latest Real Estate Trends suggests we list the most expensive Real Estate Markets in the country, Mumbai Tops the Chart. Although with a 2% increase in the affordability index, it still stands at a high 51% in 2023, while last year it was at 53%.
Kolkata, Pune, and Ahmedabad are the most affordable residential real estate markets of the Country. This analysis is done by the highly recommended Affordability Index report by Knight Frank India.
After a temporary dip in affordability during 2022, the ratio of Equated Monthly Installment (EMI) to income for households has shown improvement in 2023, according to the report.”
Despite a slight improvement from the previous year, the overall affordability of homes in various cities has seen a significant positive shift compared to the pre-pandemic levels of 2019. According to the Knight Frank Affordability Index, which gauges the percentage of income needed to support the EMI of a housing unit in a specific city, the outlook for 2024 is optimistic. The anticipated moderation in inflation and the projected downward trend in interest rates are expected to further enhance home affordability in the coming year.
The Affordability Index is a crucial metric, reflecting the proportion of household income required to cover the EMI of a housing loan for a unit in a given city. For instance, an affordability index of 40 percent for a city indicates that, on average, households in that city need to allocate 40 percent of their income towards funding the EMI of a housing loan for a residential unit. This index serves as a valuable tool in assessing the financial feasibility of homeownership and predicting trends in the real estate market.
In 2023, Ahmedabad retained its status as the most affordable housing market in India, boasting an affordability ratio of 21 percent. Following closely were Kolkata and Pune, both registering a 24 percent affordability ratio. Shishir Baijal, Chairman & Managing Director of Knight Frank India, expressed optimism about strengthened affordability in anticipation of stable GDP growth and inflation moderation in FY 2024-25. Moreover, if the Reserve Bank of India (RBI) decides to reduce the repo rate later in 2024, leading to lower home loan interest rates, the affordability of homes is poised to improve further.
Real estate Trends: Mumbai Getting Affordabale
Surprisingly, Mumbai, known for being the most expensive residential market in the country, witnessed a 2 percent improvement in its affordability index, decreasing from 53 percent in 2022 to 51 percent in 2023. Analyzing the trend since the pre-pandemic period, Mumbai exhibited a notable 16 percent enhancement in affordability levels, dropping from 67 percent in 2019. Hyderabad, the second most expensive market, maintained a consistent affordability index of 30 percent despite a notable 11 percent increase in home prices in 2023.
The National Capital Region (NCR) experienced an improvement in affordability, with its index decreasing from 29 percent in 2022 to 27 percent in 2023. Bengaluru, the fourth most expensive market, had a marginal 1 percent increase in its affordability index from 2022, settling at 26 percent in 2023. Notably, this represented a 6 percent improvement from the pre-pandemic year of 2019. Overall, the affordability landscape in major Indian cities appears to be evolving, reflecting the complex interplay of economic factors and policy decisions.