Stable Interest Rates Boost Home Affordability in India's Top Cities
Ahmedabad, Pune, and Kolkata are the most affordable housing markets in India, according to Knight Frank India's Affordability Index.
Home AffordabilityIndian Housing MarketInterest RatesKnight Frank IndiaReal EstateReal Estate PuneAug 07, 2024
The Affordability Index, which tracks the EMI (Equated Monthly Instalment) to income ratio for an average household, has shown steady improvement from 2010 to 2021 across the eight leading cities of India. However, the Reserve Bank of India's (RBI) decision to raise the REPO rate by 250 bps in a space of nine months starting May 2022 impacted affordability across cities in 2022.
Thankfully, the REPO rate has remained steady since February 2023, and 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 multi-year highs in H1 2024.
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Frequently Asked Questions
What is the current state of home affordability in India?
Home affordability has remained stable in H1 2024, with Ahmedabad being the most affordable housing market among the top eight cities, followed by Pune and Kolkata at 24% each.
How has the COVID-19 pandemic affected the residential real estate market in India?
The pandemic became a catalyst for the residential real estate market, triggering a recalibration of both property prices and lending rates that significantly boosted demand.
What is the expected outlook for homebuyer demand in 2024?
The stable interest rate scenario is expected to sustain in the near term, as economic growth continues to remain on track, which, coupled with rising income levels and improving affordability, is expected to continue supporting homebuyer demand in 2024.
Which cities have witnessed the highest growth in prices in H1 2024?
Bangalore grew at 9% YoY, followed by Mumbai, NCR, and Pune at 4% YoY each, and Chennai and Hyderabad at 5% YoY each.
How has the weighted average price changed across cities since 2019?
Whilst affordability has improved across all markets since 2019, prices have seen a rise across the top eight markets, ranging between 5% in Ahmedabad to 26% in Hyderabad.
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