For the initial half of the year of 2023, the real estate consultancy came up with its “Affordability Index” for the most expensive eight cities.Knight Frank released the first Global Affordability Monitor, which ranks 32 cities globally according to three important criteria, in order to better understand the global affordability issue.
A report said, “The EMI (Equated Monthly Instalment) to ratio of income for a typical household is tracked by the index.”It shows the percentage of earnings that a household has to put together in order to pay the EMI on the property in a specific city.
Ratios of cities according to KFI
According to the newly issued Knight Frank Affordability Index for 2023, Mumbai, which is renowned for its busy streets, diversified culture, and a healthy economy, has earned the title of being the most expensive city for people to reside in. India’s most inexpensive city to reside in is Ahemdabad.
Ahmedabad has the most inexpensive real estate prices among the most expensive eight cities in India, having an affordability ratio of 23%.
After Ahmedabad, these are the cities with their affordability ratio:
Kolkata and Pune- 26%
Chennai and Bengaluru- 28%
Delhi NCR- 30%
Hyderabad- 31%
Mumbai- 55%
According to the report, “an EMI to income ratio of more than 50% is deemed unaffordable because this is the point at which banks will rarely provide a mortgage.”
A city that has a 40% Knight Frank Affordability Index rating means that, on an average, residents in that city have to spend 40% of what they earn to pay the monthly instalments on a home loan for that particular unit.
Ironically, Mumbai is perhaps the least accessible city in India because it comes in the second-most expensive category among these cities in India.
The index revealed that, as of now in 2023, affordability has decreased across all markets due to increasing house loan rates. The Reserve Bank of India (RBI) increased the Repo rate about 250 bps from May of the previous year in an effort to reduce inflationary.
According to a survey by Knight Frank, “the 250 basis point increase in repo rates from May 2022 to February 2023 decreased affordability by an average of 2.5% across cities and raised the EMI load by 14.4%. The demans has not diminished and has maintained the multi-year highs registered in H1 2023. To combat rising inflation, the central bank increased the REPO rate by 250 bps since then. This has since increased the EMI load by 14.4% and decreased affordability by an average of 2.5% across cities, according to the consultancy.”
After February of this year, the RBI stopped raising interest rates.
From 2010 to 2021, the affordability index improved steadily across India’s eight major cities, especially throughout the epidemic when the RBI lowered repo rates to unprecedented levels, according to Knight Frank.
Based on Knight Frank India, the rise in house loan interest rates from January and the end of June of the current year had an impact on the price range of houses throughout India.