Ahmedabad continues to be the most affordable housing market at 22 per cent, followed by Pune at 26 per cent and Chennai at 27 per cent, among the top eight cities in India, global property consultant Knight Frank India's Affordability Index for the third quarter (Q3) of 2022 showed.
However, the affordability quotient in all major property markets has declined due to the rise in median loan rates after the Reserve Bank of India (RBI ) recently hiked the repo rate by 50 basis points (bps).
Knight Frank noted that a 0.95 per cent cumulative increase in the median home loan rate impacted affordability and homebuyers’ purchase decisions.
Knight Frank's proprietary Affordability Index, which tracks the Equated Monthly Instalment (EMI) to income ratio for an average household, witnessed steady improvement from 2010 to 2021 across India’s eight leading cities, mainly during the pandemic when the RBI sharply reduced the repo rates.
RBI’s fourth-consecutive repo rate hikes have decreased home purchase affordability on an average by 2 per cent across markets and increased the EMI load by 7.4 per cent, as per the nine-month assessment of the Affordability Index.
Shishir Baijal, chairman and managing director of Knight Frank India, said that due to the rising median loan rates, home affordability has worsened in 2022. Baijal said affordability has declined by 2 per cent across cities since the rate cycle changed. On September 30, 2022, the central bank increased the repo rate by 50 bps, taking the cumulative hike to 190 bps in 2022.
"The 0.95% cumulative increase in median home loan rate will impact homebuyers' affordability and thus their purchase decisions. However, with the need for homeownership still strong, homebuyers will make necessary compromises by considering lower-priced housing units rather than deferring their purchases as expectations of further price increases will discourage postponement," he added.