Housing affordability ratio improves in Hyderabad

Hyderabad: Houses in Hyderabad are becoming more and more affordable, according to a new study. The housing affordability ratio in Hyderabad has improved in the last decade from 53 per cent in 2011 to 29 per cent in 2021. In the last six years itself, the city of Nizams saw about 8 percentage point improvement […]

Hyderabad: Houses in Hyderabad are becoming more and more affordable, according to a new study. The housing affordability ratio in Hyderabad has improved in the last decade from 53 per cent in 2011 to 29 per cent in 2021.

In the last six years itself, the city of Nizams saw about 8 percentage point improvement in the affordability ratio with the ratio improving from 37 per cent in 2016 to 29 per cent this year, a Knight Frank India Affordability Index reports.

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The affordability index indicates the proportion of income that a household requires to fund the monthly installment (EMI) of a housing unit in the city. So, a 29 per cent index level indicates that the average household in Hyderabad spends 29 per cent of their income to fund the EMI of housing loan for that unit.

The report mentions that except for Mumbai, which recorded 53 per cent affordability ratio in 2021, all other cities recorded well below the threshold of affordability set of 50 per cent ratio. Neighboring cities of Hyderabad, both Bengaluru and Chennai recorded affordability ratio of 26 per cent and 25 per cent respectively.

On pan-India basis, the home affordability stood at decadal best in 2021 and this is being attributed to a decline in housing prices and multi-decade low home loan interest rates.

The Knight Frank Affordability Index captures movement in key constituents like property prices, home loan interest rate and average household income to determine the buyers’ ability to purchase a house. Since banks underwrite home loans when the EMI to Income is below 50 per cent, on that account, existing income and average ticket-size metrics across seven out of eight markets make it possible for a home-buyer to easily finance their home purchase.

Despite the pandemic period since early 2020, which has created disruptions in household incomes, housing affordability has further improved.

Knight Frank India chairman and MD Shishir Baijal said, “Over the last decade housing market has undergone a structural transformation on both demand as well as supply side. The key catalyst remained – affordability – which has witnessed gradual improvement since 2015. For most part of the last 5-6 years residential prices corrected leading to better affordability, however, the recent reduction in home loan interest rate to below 6.5 per cent has been a deciding factor in the significant improvement in home affordability in the last 24 months.”

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