Home Affordability Index: Mumbai homebuyers have to spend 51 percent of their income on paying home loan EMI. Due to which Mumbai’s housing market is one of the most unaffordable markets among the top 8 real estate markets in the country. According to the report of Knight Frank India, Mumbai is the only city in the country which is above the limit set in the Affordability Index. Whereas among the top 8 cities, Ahmedabad’s housing market is the most affordable market.
Ahmedabad is the most affordable
According to the Knight Frank India report Affordability Index, due to the interest rates remaining stable since the end of 2023, stability has been seen in the ability to buy a house during the first half of 2024 from January to June. According to the index, Ahmedabad’s housing market is the most affordable market among the top 8 cities with a ratio of 21 percent. This means that the people of Ahmedabad have to spend only 21 percent of their income on paying home loan EMI. Kolkata is in second place in terms of affordability and the people of Kolkata are spending 24 percent of their income on EMI payment. People of Pune have to spend 24 percent and people of Chennai have to spend 25 percent of their income on EMI.
28% cost of EMI payment in Delhi NCR
Bengaluru is at the fifth position in the Affordability Index and homebuyers of this city have to spend 26 percent of their income on paying EMIs. Delhi NCR is at the sixth position. Homebuyers in Delhi NCR have to spend 28 percent of their income on paying EMIs. 30 percent of the income of people in Hyderabad is spent on paying EMIs. Whereas people in Mumbai have to spend more than half of their total income on paying EMIs.
In 2019, Mumbai buyers were spending 67% on EMI
Just before the Corona epidemic, in 2019, people of Mumbai had to spend 67 percent of their income on EMI payment. In 2020, it came down to 61 percent. In 2021, 52 percent, in 2022, 53 percent and in 2023, 51 percent of the amount was being spent. Whereas in 2010, 92 percent of the income was being spent on EMI payment. According to Knight Frank India, from 2010 to 2021, the Affordability Index has seen a steady improvement in the top 8 cities. Especially during the Covid epidemic, the Reserve Bank of India had cut the repo rate drastically, due to which people’s ability to buy a house increased, so less money was being spent on EMI payment compared to income.
Improvement in Affordability Index from 2023
From May 2022 onwards, RBI started increasing interest rates to control inflation. In less than a year, the repo rate was increased by 250 basis points and it increased from 4 percent to 6.50 percent, due to which homebuyers had to spend more money on EMI payment than income in 2022. But after February 2023, the repo rate is stable and the income of the people has also increased during this period, due to which the affordability index has improved despite the increase in property prices and expensive EMI due to high interest rates. According to Knight Frank, the trend of interest rates remaining stable may continue in the future as well.
Buying a house will remain affordable due to stable home loan rates
Commenting on the Affordability Index, Knight Frank Chairman and MD Shishir Baijal said, stability in affordability is very important to maintain the momentum of home buying and to keep the sales boom going, which accelerates the country’s economic growth. He said, due to RBI’s 7.2 percent GDP forecast in FY 2024-25 and stable interest rates, improvement in income and affordability levels, demand for homes is expected to remain strong in 2024.
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