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Mumbai most expensive housing market in the country; Ahmedabad most affordable: Report

The cumulative 50 bps rate hike by the RBI has decreased home purchase affordability on an average by 2 percent across markets and increased EMI load by 7.4 percent

Mumbai is the only city that witnessed the affordability index improving at the rate of 4 percent from 53 percent in 2021 to 57 percent in Q3 2022.

Mumbai is the only city that witnessed the affordability index improving at the rate of 4 percent from 53 percent in 2021 to 57 percent in Q3 2022.

Mumbai is the most expensive residential market in the country followed by Hyderabad and Delhi-NCR. Ahmedabad continued to remain the most affordable housing market amongst the top eight cities, with a ratio of 22 percent followed by Pune at 26 percent and Chennai at 27 percent, said Knight Frank India’s Affordability Index for Q3 2022.

The cumulative 50 bps rate hikes by the Reserve Bank of India (RBI) have decreased home purchase affordability on an average by 2 percent across markets and increased EMI load by 7.4 percent, it said.

All markets have seen a decline in affordability following the recent rise in median loan rates as a result of the 50 bps rise in REPO rates. The 0.95 percent cumulative increase in median home loan rate will impact affordability of homebuyers and thus their purchase decisions as well, it noted.

The affordability index tracks the EMI (equated monthly instalment) to income ratio for an average household. It witnessed steady improvement from 2010 to 2021 across the eight leading cities of India especially during the pandemic when the RBI cut REPO rates to decadal lows.

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However, with the fourth consecutive REPO rate hike, the cumulative 50 bps rate hikes by the RBI have decreased home purchase affordability on an average by 2 percent across markets and increased EMI load by 7.4 percent, said the nine-month assessment (9M CY 2022).

Mumbai remains the most expensive residential market in the country. From 97 percent in 2010, the home purchase affordability index registered a significant improvement to 53 percent in 2020. Mumbai is the only city that witnessed the affordability index improving at the rate of 4 percent from 53 percent in 2021 to 57 percent in Q3 2022. This still remains very much optimistic in regards to the pre-pandemic levels of 66 percent in 2019.

Hyderabad is the second most expensive residential market in the country. From 53 percent in 2010, the home purchase affordability index improved to 33 percent in 2019. With the advent of the pandemic in early 2020, the affordability index further improved to 29 percent in 2021. In Q3 2022, the affordability index of the city currently stands at 31 percent.

NCR ranks third in terms of the most expensive residential market in the country during Q3 2022. The city’s affordability index has been fluctuating year on year. From 48 percent in 2010, the home purchase affordability index improved to 34 percent in 2019. With the advent of the pandemic in early 2020, the affordability index further improved to 26 percent in 2020 but declined to 28 percent in 2021. In Q3 2022, the affordability index of the city currently stands at 30 percent.

Bengaluru follows NCR in terms of expensive residential markets in the country, ranking 4th expensive city in India. From 39 percent in 2010, the home purchase affordability index improved to 32 percent in 2019. With the advent of the pandemic in early 2020, the affordability index further improved to 24 percent in 2020 and again to 26 percent in 2021. In Q3 2022, the affordability index of the city currently stands at 28 percent.

Ahmedabad has consistently been the most affordable city in India since 2019. From 46 percent in 2010, the home purchase affordability index improved to 25 percent in 2019. With the advent of the pandemic in early 2020, the affordability index further improved to 20 percent in 2021. In Q3 2022, the affordability index of the city currently stands at 22 percent.

Pune maintains its stance and remains the second most affordable residential market in the city. From 45 percent in 2010, the home purchase affordability index improved to 28 percent in 2019. With the advent of the pandemic in early 2020, the affordability index further improved to 25 percent in 2020 and then to 24 percent in 2021. In Q3 2022, the affordability index of the city currently stands at 26 percent.

“The home affordability, due to the rise in median loan rates has worsened in 2022. On September 30, 2022, the RBI increased the repo rate by 50 bps taking the cumulative hike to 190 bps in the year 2022. Affordability has worsened by 2 percent points across cities since the rate cycle changed. The 0.95 percent cumulative increase in median home loan rate will impact affordability of homebuyers and thus their purchase decisions as well,” said Shishir Baijal, Chairman and Managing Director, Knight Frank.
Moneycontrol News
first published: Oct 11, 2022 03:44 pm