Hyderabad ranks second in expensive housing markets

The rising EMI to income ratios across Indian cities have been partly attributed to higher home loan rates, impacting affordability for potential homeowners.

Hyderabad: Hyderabad has secured the second spot as the most expensive housing market in the country in terms of EMI (Equated Monthly Instalment) to income affordability ratio, according to the Affordability Index by Knight Frank India.

The Affordability Index, which gauges the proportion of household income needed to fund the monthly EMI for a housing unit, showed that despite the robust demand and the city’s economic vitality, Hyderabad’s housing market carried a ratio of 31 per cent in the first half of 2023. This represents a marginal one-percentage-point increase from the 30 per cent ratio recorded in 2022.

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The rising EMI to income ratios across Indian cities have been partly attributed to higher home loan rates, impacting affordability for potential homeowners. The most affordable housing market among the top eight cities turned out to be Ahmedabad, boasting a ratio of 23 per cent, closely followed by Pune and Kolkata, each at 26 per cent.

The analysis provided by Knight Frank’s Affordability Index spans a decade, highlighting the changes in EMI to income ratios. Between 2010 and H1 2023, Hyderabad’s ratio progressed as follows: 47 per cent in 2010, 34 per cent in 2019, 31 per cent in 2020, 28 per cent in 2021, 30 per cent in 2022, and 31 per cent in H1 2023.

Despite the influence of increased home loan rates impacting affordability across the board, the housing market’s demand has remained robust. Notably, the mid and premium segments of the market, encompassing housing units valued at Rs 5 million to Rs 10 million and above Rs 10 million, respectively, have been driving sales volumes. However, the under Rs 5 million segment has witnessed a decline, primarily due to a higher dependency on home loans and sensitivity to interest rate hikes.

Shishir Baijal, Chairman and Managing Director of Knight Frank India, acknowledged the resilience of the market despite interest rate increases, expressing confidence in the RBI’s management of inflation. He emphasized that while the residential demand has soared to multi-year highs, further interest rate hikes might impact the affordability and sentiments of homebuyers.