Home Affordability At Decadal Best In 2021: Knight Frank India Affordability Index

In its annual proprietary study, the Affordability Index 2021, Knight Frank notes that Indian markets are at their decadal best in terms of housing affordability. All markets, except Mumbai, are recorded to be well below the threshold of affordability set at 50% ratio. Ahmedabad emerged the most affordable housing market in the country with an affordability ratio of 20% followed by Pune and Chennai at 24% and 25% respectively in 2021. Mumbai was the only one that recorded higher than threshold affordability ratio at 53%, however, it has improved the most since 2011.

Knight Frank's proprietary Affordability Index, which tracks the EMI (Equated Monthly Installment) to total income ratio for an average household, has shown a meaningful improvement in affordability since 2010. Despite the pandemic period since early 2020, which has created disruptions in household incomes, housing affordability has further improved. Decline in house prices and multi-decade low home loan interest rates have helped improve housing affordability in 2021.

The Knight Frank Affordability Index captures movement in key constituents like property prices, home loan interest rate and average household income to determine the buyers' ability to purchase a house. Since banks underwrite home loans when the EMI to Income is under 50%, on that account, existing income and average ticket-size metrics across seven out of eight markets make it possible for a homebuyer to easily finance their home purchase.

"The recent improvements in the home purchase affordability across major cities in the country has been a driving factor for the upliftment of the homebuyer sentiments. The affordability index at 10 years low has made the home buying decisions more conducive than ever, making it the most opportune time for buying a home when the home loan interest rates are also below 6.5%. The affordability ratio for Mumbai has improved since 2011 but we expect positive outcomes in the upcoming year as the sales have rallied to their best in the past few months. As a result, now is an excellent moment for potential buyers to buy a home because all aspects, including the regulatory environment, pricing, and home loan rates, are favourable," says Rohit Poddar, Managing Director, Poddar Housing and Development Ltd.