MUMBAI: Ahmedabad has emerged as the most affordable housing market in the country with an affordability ratio of 24% followed by Pune and Chennai at 26% each in 2020, according to Knight Frank India’s Affordability Index 2020.
The decline in house prices and multi-decade low home loan interest rates have helped improve housing affordability during the year. While Mumbai is the most expensive market, with an affordability ratio of (61%), other cities like Ahmedabad, Chennai, and Pune are relatively more affordable. Even for Mumbai, the affordability ratio has improved from a high of 93% in 2010 to 61% in 2020.
Knight Frank’s Affordability Index tracks the Equated Monthly Instalment (EMI) to income ratio for an average household, has shown improvement in affordability over the last decade.
“The affordability ratio across top eight cities has improved tremendously over this decade due to an increase in income level, lower interest rate and subsequently lower property prices. Government interventions around improved credit flow, lower interest rate and cut in stamp duty rate in some markets has brought confidence among homebuyers in 2020. We believe a combination of best in decade affordability level and pick-up in economy will serve as key catalysts for the country’s housing market ..
The index captures movement in key variables like property prices, home loan interest rate and household income that determine the buyer’s ability to purchase a house. City-wide average affordability statistics cannot highlight disparities in housing costs within sub-markets or across the income spectrum. A ratio of over 50% makes it difficult to secure home loans from banks and housing finance companies making it unaffordable to purchase a house.
