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4/6/2019

Affordability Improved Across India's Key Markets

Affordability improved across the country's all major cities of the country from 2014 to 2018 led by stable property prices and favorable home loan rates. The most affordable housing market in 2018 was Hyderabad, followed by Kolkata and Pune. 

Mumbai is fast climbing the affordability ladder but still not able to cross the affordability threshold. However, it is expected that Kolkata will overtake Hyderabad to become the most affordable housing market in 2020.

In a recent report, the home purchase affordability index signifies whether a household earning an average annual income is eligible for a home loan to buy a 1,000 sq ft apartment in the city, at the prevailing market price and home loan interest rate. It is important to note that a reduction in the size of an apartment may bring in affordability, without any reduction in per sq ft pricing. This reduction in the apartment’s size may be a compromise on the home buyer's side.

However, it is worth to mention that only Hyderabad, who has always been popular as a price-conscious metropolitan city, is one such city among the top seven cities which was affordable in 2013 whereas the situation flipped positively in last year. Favorable home loan rates backed by stable property price have resulted in improved affordability across cities from 2014.

It is expected that the affordability levels would continue to improve over the next three years for all key cities of the country - Mumbai, Delhi NCR, Bengaluru, Chennai, Pune, Hyderabad, and Kolkata. Over the same period, there could be a steady rise of 3 to 5 percent in residential property rates and 8 to 9 percent increase in average annual household income and home loan rates to remain range-bound. Residential real estate is bound to grow in coming days as developers align themselves with the rising demand, sales momentum is likely to grow in the next two-three years.

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