Pune Outshines Mumbai, Delhi To Become India's Second Most Affordable Housing Market: Report

Pune: Among the eight major metropolitan cities in the country, Ahmedabad has the most affordable housing this year. The ratio of the monthly loan instalment (EMI) to household income is the lowest in Ahmedabad. Pune and Kolkata are jointly in second place in terms of housing affordability. Mumbai has also shown improvement compared to last year.

Knight Frank India has released the housing affordability index for eight major metropolitan cities in the country. According to the index, with a ratio of monthly loan instalment to income of 18 per cent, homes in Ahmedabad are the most affordable. 

Last year, this ratio was 20 per cent in Ahmedabad. In Pune and Kolkata, this ratio is 22 per cent this year, placing both cities in second place in terms of housing affordability. Last year, this ratio was 23 and 24 percent respectively in Pune and Kolkata. In Mumbai, this ratio is 47 per cent, placing it last in terms of housing affordability. Last year, this ratio was 50 per cent in Mumbai, showing an improvement of 3 per cent.

Homes are becoming increasingly affordable in the eight major metropolitan cities of the country. The Reserve Bank had significantly reduced interest rates during the COVID-19 pandemic. However, to control inflation, the Reserve Bank increased interest rates by 2.5 per cent over nine months starting from May 2022. 

This had increased the ratio of monthly loan instalments to income. Since February of this year, the Reserve Bank has reduced interest rates by 1.25 per cent. This has improved the situation again, making homes more affordable. As a result, consistent sales of homes are being observed in metropolitan cities. The report states that since interest rates are likely to remain low next year as well, the performance of the housing market will remain consistent.

How is housing affordability determined?

Homes are becoming more affordable in the country because lower interest rates have reduced the monthly loan instalment. Affordable housing is determined by looking at the ratio of the monthly loan instalment to the average household income. The lower this ratio, the more affordable the houses are considered. Houses where the monthly loan instalment is less than 50 per cent of the income are considered affordable, and those where it is higher are considered unaffordable.

Affordable Housing in the Country

Metropolitan City – Loan Instalment to Income Ratio (in per cent)

Ahmedabad – 18%

Pune – 22%

Kolkata – 22%

Chennai – 23%

Bengaluru – 27%

Delhi – 28%

Hyderabad – 30%

Mumbai – 47%