Ahmedabad is the most affordable housing market among eight major cities whereas Mumbai is unaffordable due to the high EMI to total income ratio, according to Knight Frank. According to Knight Frank’s Affordability Index 2021 report released on Wednesday, Indian markets are at their decadal best in terms of housing affordability.
House price declines and multi-decade low home loan interest rates have helped improve housing affordability in 2021, according to the report. The affordability index denotes the proportion of a household’s income required to fund the equated monthly instalment (EMI) of a housing unit in a specific city.
So, a 40% index level for a city means that on average, households in that city must spend 40% of their income to fund the EMI of a housing loan for that unit.
An EMI-to-total-income ratio of more than 50% is considered unaffordable. According to Knight Frank, the affordability ratio in Delhi-NCR improved the most, from 38% in 2020 to 28% in 2021.
“With the exception of Mumbai, all markets are recorded to be well below the threshold of affordability set at 50% ratio,” it said. In 2021, Ahmedabad emerged as the most affordable housing market in the country, with a 20% affordability ratio, followed by Pune at 24%.
The affordability ratio in Mumbai was 53%. However, since 2011, the city’s affordability has improved the most. Hyderabad had an affordability index of 29%, while Bengaluru had an index of 26%.
Chennai and Kolkata both received 25%. To determine a buyer’s ability to purchase a house, the index tracks changes in key constituents such as property prices, home loan interest rates, and average household income. Banks approve home loans when the EMI to income ratio is less than 50%.