30 Dec 2023

Home Affordability Improves Across Indian Cities in 2023

Introduction

The year 2023 brings good news for homebuyers in India, as the affordability of residential properties has improved across several cities. According to Knight Frank India's proprietary Affordability Index, the EMI (Equated Monthly Instalment) to income ratio for households has seen a positive shift. This improvement in affordability is a result of various factors such as a projected downward trend in interest rates and expected moderation in inflation. In this article, we will explore the most affordable and expensive residential markets in India, as well as the changes in affordability levels since the pre-pandemic year of 2019.

Ahmedabad: The Most Affordable Housing Market

Ahmedabad, the vibrant city in Gujarat, continues to hold the title of the most affordable housing market in India. With an affordability ratio of 21%, households in Ahmedabad need to spend only 21% of their income on EMI payments for housing loans. This ratio signifies a significant improvement in affordability compared to the previous year. Ahmedabad's affordability level has remained relatively stable since 2019, making it an attractive destination for homebuyers looking for affordable options.

Kolkata and Pune: Affordable Alternatives

Following closely behind Ahmedabad, Kolkata and Pune share the second spot on Knight Frank's affordability index with a ratio of 24% each in 2023. Both cities have witnessed a 1% improvement in affordability compared to the previous year. Kolkata, in particular, has experienced an impressive 8% increase in affordability since 2019. These cities offer a balanced mix of affordability and quality of life, making them attractive options for individuals seeking residential properties within their budget.

Mumbai: The Expensive Real Estate Market

While affordability has improved in most cities, Mumbai remains the only city that surpasses the affordability threshold of 50%. The maximum affordability threshold is a level beyond which banks are reluctant to underwrite mortgages. Despite this, Mumbai has seen a slight improvement in its affordability index, measuring at 51% in 2023 compared to 53% in 2022. Looking at the trend from the pre-pandemic period, the city has made significant progress, with a 16% improvement in affordability since 2019. Mumbai's real estate market continues to be a desirable but challenging destination for homebuyers.