Indian Cities with the Most Affordable Housing Markets Revealed
Ahmedabad, Pune, and Kolkata top the list of most affordable housing markets in India, according to Knight Frank India’s Affordability Index.
Affordable HousingIndian Real EstateResidential MarketKnight Frank IndiaAffordability IndexReal Estate PuneAug 07, 2024
According to Knight Frank India’s Affordability Index, house purchase affordability in India's top eight property markets remained stable in the first half of 2024. This stability can be attributed to steady interest rates since the end of 2023.
Ahmedabad has emerged as the most affordable city with an Equated Monthly Instalment (EMI) to income ratio of 21% for an average household. Pune and Kolkata followed closely with an EMI to income ratio of 24%. On the other hand, Mumbai was the only city that remained marginally higher than the threshold at 51%.
Stable affordability is essential to sustaining homebuyer demand and sales momentum, which, in turn, acts as a key economic driver for the country. As income levels rise and economic growth strengthens, end-users’ financial confidence is significantly bolstered, encouraging them to make longer-term financial commitments toward asset creation,
said Shishir Baijal, CMD, Knight Frank India.
Given the RBI’s healthy 7.2% GDP growth estimate for FY 2025 and a stable interest rate scenario, income and affordability levels are expected to continue to support homebuyer demand in 2024.
The Affordability Index witnessed steady improvement from 2010 to 2021 across the eight leading cities of India, especially during the pandemic when the Reserve Bank of India (RBI) cut policy repo rate (REPO) to decadal lows.
The central bank subsequently raised the REPO rate by 250 bps in a space of nine months starting May 2022 to address growing inflation. This impacted affordability across cities in 2022.
However, as the REPO rate has remained steady since February 2023, healthy income growth has helped counteract rising prices and comparatively high interest rates, bringing affordability back to the current levels.
Demand has continued to grow since 2023 and has sustained at the multi-year highs in the first half of 2024. The stable interest rate scenario is expected to sustain in the near term, as economic growth continues to remain on track.
The COVID-19 pandemic became a catalyst for the residential real estate market, triggering a recalibration of both property prices and lending rates that significantly boosted demand. This residential market momentum has persisted, supported by strong economic factors such as effective inflation control, and strong economic growth, which has improved home affordability.
All markets have shown improved affordability, leading to sustained demand for homes. In Mumbai, for instance, the affordability index improved by 16 percentage points, moving from 67% in 2019 to 51% in H1 2024.
Additionally, the level has been maintained over the past 18 months, owing to steady policy rates and a controlled rise in property prices. The pandemic has thus instilled an enduring shift in homebuyers' sentiments, keeping demand buoyant.
About Knight Frank India
Knight Frank India is a leading international property consultancy. They provide a comprehensive range of services across various sectors, including residential and commercial real estate.
Frequently Asked Questions
What is the most affordable city for housing in India?
Ahmedabad is the most affordable city for housing in India, with an EMI to income ratio of 21% for an average household.
Which cities follow closely in terms of affordability?
Pune and Kolkata follow closely, each with an EMI to income ratio of 24%.
Why has affordability remained stable in India's top eight property markets?
Affordability has remained stable due to steady interest rates since the end of 2023.
What is the expected GDP growth rate for FY 2025, according to the RBI?
The RBI has estimated a healthy 7.2% GDP growth rate for FY 2025.
How has the pandemic impacted the residential real estate market?
The pandemic has triggered a recalibration of both property prices and lending rates, significantly boosting demand and improving home affordability.
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