New Delhi(India), 18/08/23: A new survey released by Knight Frank India, a major property adviser, Ahmedabad is the most cheap Indian city to live in.
The Knight Frank affordability index measures living affordability by dividing the EMIs that a resident of that city must pay if they purchase a home with a home loan by the total income of a typical household in that city.
The Knight Frank Affordability Index represents the percentage of income required by a household to cover the monthly instalment (EMI) of a housing unit in a specific city.
So, a Knight Frank Affordability index rating of 40% for a city means that residents in that city must spend 40% of their income to cover the EMI of a housing loan for that unit on average.
An EMI/Income ratio of more than 50% is deemed unaffordable because it is the point at which banks will rarely underwrite a mortgage.
Mumbai has the most costly housing market.
The home loan EMI to income ratio in Mumbai is a shocking 55%, which means that an ordinary household must pay more than half of its income on home loan EMIs if they want to buy a house on loan.
Next, with an EMI-to-income ratio of 31%, Hyderabad is the second most costly city.
The Delhi National Capital Region comes in third, requiring you to pay 30% of your income for home loan EMIs.
Bengaluru, Karnataka, and Chennai, Tamil Nadu, tie for second place with an EMI to income ratio of 28%. Following that is Pune, Maharashtra, where an average household must pay 26% of their salary in housing loan EMIs. Kolkata, West Bengal, has the same rate.
Finally, Ahmedabad in Gujarat is the most affordable Indian city to live in, with an average household paying 23% of their income on home loan EMIs. This index is based on a 20-year loan term, an 80% loan-to-value ratio, and a consistent house size across cities.
Living in these cities has only gotten more expensive in the last year. These EMI-to-income ratios have risen by 1-2 percentage points across cities as the Reserve Bank of India has raised its key lending rate by 250 basis points since last year. Since then, this has raised the EMI load across cities by an average of 14.4%.
Houses costing less than Rs 50 lakh have been the hardest hit. According to the research, sales in this category have decreased. According to the report, homebuyers in this segment have a much higher reliance on home loans and are thus more sensitive to rate hikes than those in the mid and premium segments, so they can no longer afford home loans with higher EMIs, and many of them are unable to buy houses.
On the other hand, demand for the mid and premium segments has regularly outperformed. This year, sales of houses costing between 50 lakh and 1 crore have increased to roughly 59,000 units, while sales of premium mansions costing more than 1 crore have gone upto 46,000.
According to the survey, overall residential demand is at a multi-year high, but the lower and middle-income groups are plainly suffering.
Knight Frank India Chairman and Managing Director Shishir Baijal stated, “The RBI’s extremely capable handling of the inflationary scenario has inspired confidence in the country’s economic environment. This is also reflected in the residential demand which is at a multi-year high and office demand which has remained resilient even as office markets globally have been struggling.”
