Kolkata in 2nd spot among Indian cities in home affordability index: Report

Kolkata: Kolkata has bagged the second spot in home affordability index among Indian cities with a ratio of 24 percent in 2023.

The ratio level of the city has improved by one per cent from 2022 and by eight per cent from the pre-pandemic year of 2019, according to Knight Frank India’s proprietary ‘Affordability Index’.

The EMI (Equated Monthly Installment) to income ratio for households in the Indian cities has improved in 2023 after the brief decline in affordability in 2022. While marginally better than last year, home affordability across cities also significantly improved since 2019. Expected moderation in inflation and projected downward trend in interest rates should further improve home affordability in 2024.

Ahmedabad remains the most affordable housing market in the country with an affordability ratio of 21 per cent which implies that on an average a household in Ahmedabad needs to spend 21 per cent of its household income to pay EMI for housing loans. Pune at 24 per cent in 2023 is also second in the list along with Kolkata.

Mumbai is the only city beyond the affordability threshold of 50 per cent, a level exceeding which banks rarely underwrite a mortgage. The most expensive residential market of the country, Mumbai, has however seen an improvement of two per cent in its affordability index measured at 51 per cent in 2023 from 53 per cent in 2022.

Hyderabad is the second most expensive residential market in the country. The affordability index of the city remained unchanged at 30 per cent for both the years of 2023 and 2022 as home prices increased by a prolific 11 per cent in 2023.

The National Capital Region (NCR) has seen its affordability index improve to 27 per cent in 2023 from 29 per cent in 2022. Bengaluru is the fourth most expensive market with an affordability index of 26 per cent in 2023. The ratio of the city has improved marginally by 1 per cent since 2022 and six per cent from the pre pandemic year of 2019. The Affordability Index of Chennai has improved by two per cent from 27 per cent in 2022 to 25 per cent in 2023.

Shishir Baijal, chairman and managing director, Knight Frank India, said, “Anticipating stable GDP growth and moderation in inflation in FY 2024-25, affordability is expected to strengthen. Further, if the RBI decides to lower the repo rate later in 2024 as is widely expected leading to a reduction in home loan interest rates, the affordability of homes in 2024 could see a noteworthy enhancement, providing a comprehensive boost to the sector.”