Ahmedabad India's most affordable housing market in H1CY22: Knight Frank

All markets decline in affordability due to rise in home loan rates

Of the top eight cities in the country, Ahmedabad was the most affordable for home buyers in the first half of calendar year 2022, finds Knight Frank India's latest proprietary study Affordability Index.

In terms of the home purchase affordability index, Ahmedabad improved from 46 per cent in 2010 to 25 per cent in 2019 and to 22 per cent in H1 of 2022. Ahmedabad's best performance was, however, at 20 per cent in 2021 with the affordability index improving post pandemic.

Following Ahmedabad are Pune and Chennai, at 26 per cent each, even as the Knight Frank India study found that all markets have seen a decline in affordability due to the recent rise in home loan rates triggered by the 90 BPS rise in repo rates.

For its proprietary Affordability Index, Knight Frank India tracks the equated monthly installment (EMI) to income ratio for an average household to calculate a city's score. The study has shown a steady improvement from 2010 to 2021 across the top eight cities in India, especially during the pandemic when the Reserve Bank of India (RBI) cut repo rates to decadal lows.

However, with two consecutive repo rate hikes amounting to a cumulative 90 bps spike has decreased home purchase affordability by two per cent on average across markets and has raised the EMI load by 6.97 per cent, said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

"On an average, affordability has decreased by 200-300 basis points across major markets. However, despite the hike in the rates, markets remain largely affordable. This, coupled with the positive change in sentiments towards home ownership, should keep demand unhindered...Further, factors like strong economic growth outlook, financial stability and job security, the purchasing capabilities of potential buyers are expected to remain intact," Baijal added.

Among the remaining top five cities, Kolkata was the next most affordable at 27 per cent in the index for H1 2022, followed by Bengaluru (28 per cent), NCR (30 per cent), Hyderabad (31 per cent) and Mumbai (56 per cent).