Hyderabad is now the most expensive city after Mumbai, while pushing New Delhi to third place
Posted Date – 12:46 AM, Sat – 12/31/22
Hyderabad was the most expensive city after Mumbai, pushing New Delhi to third place. — Photo: Anand Dharmana
Hyderabad: Hyderabad has now become the most expensive city after Mumbai, while pushing New Delhi to third place. In its annual proprietary research report, the 2022 Affordability Index, Knight Frank noted that the city’s home buying affordability levels have declined this year compared to 2021.
According to the study, repo rates have risen cumulatively by 225 basis points, and the ensuing rise in home loan rates, coupled with higher dwelling prices, has led to lower affordability. However, it remains significantly better than pre-pandemic levels, the study said.
The home affordability index improved from 53 percent in 2011 to 34 percent in 2019. With the arrival of the epidemic in early 2020, the affordability index has further increased to 28% in 2021 and is currently at 30%.
The affordability index represents the proportion of income a household needs to finance the monthly installment payment (EMI) for an urban housing unit. Hence, an index level of 30% indicates that the average household in Hyderabad spends 30% of its income on EMI towards the housing loan for that unit.
The report mentioned that with the exception of Mumbai, which recorded an affordability ratio of 53% in 2022, all other cities recorded well below the threshold set by the affordability ratio of 50%.
Ahmedabad emerged as the most affordable housing market in the country with an affordability rate of 22% in 2022, followed by Kolkata and Pune at 25% each.
On a pan-India basis, housing affordability in 2022 deteriorated slightly for the first time in 10 years. Even in the pandemic-affected years of 2020 and 2021, as dwelling price growth slows and the government slashes policy rates to boost liquidity in a highly stressed economic environment.
The Knight Frank Affordability Index captures movements in key factors such as property prices, home loan interest rates and average household income to determine a homebuyer’s ability to afford a home.
With banks underwriting home loans when the EMI-to-revenue ratio is below 50 percent, existing revenue and average box office size metrics in seven of the eight markets make it easy for homebuyers to finance home purchases.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said: “Despite a 225 basis point hike in repo rates in 2022 and rising house prices, housing affordability in major cities has only marginally declined by 100 to 200 basis points. Income growth and GDP The growth mitigated the severe impact of rising home loan rates and prices on the affordability index, helping the residential market to maintain momentum.”
He added, “This bodes well for the industry as it has been hoping for a turnaround. For the new year, we hope this sales momentum continues as we expect factors such as GDP growth and inflation to remain stable. “
