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Mumbai, long regarded as India's most expensive housing market, has witnessed a slight improvement in affordability for the first time, following a cumulative 100 basis point reduction in the RBI's repo rate since February. Knight Frank India's latest Affordability Index reveals Mumbai's EMI-to-income ratio dropped to 48%, just below the 50% unaffordability threshold. While affordability improved across most major cities, Delhi-NCR saw a minor dip, and Bengaluru and Hyderabad remained unchanged. Experts believe the softer home loan rates will boost buyer sentiment and potentially drive up sales.
Mumbai, known as the priciest housing market in the country, has become slightly more affordable owing to a reduction in home loan interest rates, a result of the Reserve Bank of India cutting the repo rate by 100 basis points since February. This trend was highlighted in the recently released 'Affordability Index' report by Knight Frank India, which analyses the ratio of EMI to income for average households across major Indian cities. Advertisement
The Affordability Index reflects how much of a household's income is allocated towards paying EMIs on a home loan. When this ratio exceeds 50%, the housing unit is typically deemed unaffordable, as financial institutions rarely approve mortgages beyond that threshold.
According to the report, Ahmedabad ranked as the most affordable market among India's top eight cities, with an EMI-to-income ratio of 18%. Pune followed at 22%, and Kolkata at 23%. In contrast, Mumbai was the least affordable, though it saw a noticeable improvement with the affordability level moving to 48%, down from 50% in the previous year.
Knight Frank stated that this drop marked the first instance in the index's history that Mumbai had slipped below the 50% mark. The firm noted that the city's consistent unaffordability was now being moderated due to reduced interest rates on home loans, which have improved buyers' financial leverage.
Affordability levels improved in seven out of eight cities tracked by Knight Frank during the first half of the year, correlating with the series of repo rate cuts by the RBI. In Chennai, the index dropped from 25% to 24%, while in Delhi-NCR it rose marginally to 28% from 27%, making the capital region slightly more expensive. Affordability remained stagnant in Bengaluru and Hyderabad, holding steady at 27% and 30%, respectively.
Reacting to the findings, Angad Bedi, Chairman and Managing Director of BCD Group, observed that the central bank's rate reduction was a favourable shift for homebuyers as it helped ease EMI burdens and would likely accelerate residential unit sales. He suggested that this change might encourage hesitant buyers to act before property prices rise further due to increased land and construction costs.
Bhavesh Kothari, Founder and CEO of Property First Realty, pointed out that the three repo rate reductions in the first half of the year offered relief to new buyers grappling with price hikes in the past year, while also lowering their EMI obligations, leading to better monthly savings.
Umesh Gowda H.A., Chairman and Founder of Bengaluru-based Sanjeevini Group, echoed the sentiment, adding that declining inflation and rising incomes, along with the ongoing economic upswing, were expected to strengthen homebuying sentiment in the quarters to come.
Stakeholders across the sector are optimistic that this newfound affordability could prompt renewed interest and transactional momentum in the months ahead.
Source - PTI
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