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Business EconomyPosted at: Dec 30 2021 6:33PM


Home affordability at decadal best in 2021: Knight Frank India Affordability Index

Bengaluru, Dec 30 (UNI) Knight Frank on Thursday said the Indian markets are at their decadal best in terms of housing affordability.
Ahmedabad emerged the most affordable housing market in the country with an affordability ratio of 20 percent followed by Pune and Chennai at 24 percent and 25 percent, respectively in 2021, as per Knight Frank India Affordability Index.
Mumbai was the only one that recorded a higher than threshold affordability ratio at 53 percent, however, it has improved the most since 2011, it said.
Knight Frank India Chairman and MD Shishir Baijal said due to structural transformation of the housing market on demand and supply side over the last decade, the environment for home buying has become attractive and safe.
For most part of the last 5-6 years, residential prices corrected leading to better affordability. However, the recent reduction in home loan interest rate to below 6.5 percent has been a deciding factor in the significant improvement in home affordability in the last 24 months, he said.
"No doubt it has taken a pandemic for the market to turn the corner and lift homebuyer sentiment, which is now evident across the country. This is, therefore, a great time for potential buyers to purchase a home given that all factors, in terms of regulatory environment, the pricing as well as home loan rates are conducive. We believe a combination of best affordability levels and a pick-up in economy will serve as key catalysts for the country’s housing market next year," Baijal said.
Knight Frank's proprietary Affordability Index, which tracks the EMI to total income ratio for an average household, has shown a meaningful improvement in affordability since 2010, he said.
Despite the pandemic period since early 2020, which has created disruptions in household incomes, housing affordability has further improved, Baijal said.
Decline in house prices and multi-decade low home loan interest rates have helped improve housing affordability in 2021, he said.
The Knight Frank 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.
Since banks underwrite home loans when the EMI to Income is under 50 percent, 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.
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