Home affordability has continued to be advantageous for buyers in 2024, as interest rates have remained relatively stable since late 2023. As per Knight Frank India’s Affordability Index, Ahmedabad ranks as the most affordable housing market among the eight major cities, boasting an affordability ratio of 20%. Pune follows closely with a ratio of 23%, while Kolkata has an affordability ratio of 24%. Notably, Mumbai is the only city that surpasses the affordability threshold, with a ratio slightly above at 50%, although there has been an improvement in overall affordability.
Knight Frank India’s Affordability Index tracks the EMI (Equated Monthly Instalment) to income ratio for an average household. Home affordability 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) reduced the policy repo rate (REPO) to decadal lows. However, the RBI raised the repo rate by 250 basis points (bps) over nine months starting May 2022 to tackle high inflation, thus affecting affordability across cities in 2022.
Since February 2023, however the repo rate has remained unchanged, while income has seen healthy growth which has helped offset rising home prices and relatively high interest rates, supporting affordability. Housing demand has grown at an annualised rate of 23% since 2020 and is expected to scale multi-year highs in 2024. The stable interest rate scenario is likely to persist in the near term, as the India’s economy remains on a healthy growth trajectory.
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Commenting on the report, Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “Affordability plays a crucial role in sustaining homebuyer demand and driving sales, which significantly contribute to the country’s economic growth. While property prices have seen a considerable rise, the steady increase in income levels has helped individuals maintain the financial confidence needed to invest in properties. As incomes grow and the economy strengthens, end-users are more inclined to make long-term financial commitments toward asset creation. With the RBI projecting a healthy 6.6% GDP growth for FY 2025 and a stable interest rate environment,
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