Hyderabad 2nd priciest city for homes in India

The Knight Frank Affordability Index indicates the proportion of income that a household requires to fund the monthly installment (EMI) of a housing unit in a particular city

Hyderabad: Hyderabad is the second most expensive residential market in the country. Despite affordability index of the city remained unchanged at 30 per cent for both the years of 2023 and 2022, home prices increased by 11 per cent in 2023, according to Knight Frank India’s proprietary Affordability Index.

The Index further revealed that the EMI (Equated Monthly Installment) to income ratio for households has improved in 2023 after a brief decline in affordability in 2022. While marginally better than last year, home affordability across cities also significantly improved since the pre-pandemic year of 2019. Expected moderation in inflation and projected downward trend in interest rates should further improve home affordability in 2024.

Shishir Baijal, Chairman and Managing Director, Knight Frank India, said: “Anticipating stable GDP growth and moderation in inflation in FY 2024-25, affordability is expected to strengthen. Further, if the RBI decides to lower the repo rate later in 2024 as is widely expected leading to a reduction in home loan interest rates, the affordability of homes in 2024 could see a noteworthy enhancement, providing a comprehensive boost to the sector.”

The Knight Frank Affordability Index indicates the proportion of income that a household requires to fund the monthly installment (EMI) of a housing unit in a particular city. The Index level of 40 per cent for a city implies that on an average, households in that city need to spend 40 per cent of their income to fund the EMI of a housing loan for a unit. An EMI/ Income ratio of over 50 per cent is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage.

Ahmedabad remains the most affordable housing market in the country with an affordability ratio of 21 per cent which implies that on an average a household in Ahmedabad needs to spend 21 per cent of its household income to pay EMI for housing loans. Ahmedabad was followed by Kolkata and Pune at 24 per cent each in 2023. Mumbai is the only city beyond the affordability threshold of 50 per cent, a level exceeding which banks rarely underwrite a mortgage. The most expensive residential market of the country, Mumbai, has however seen an improvement of two per cent in its affordability index measured at 51 per cent in 2023 from 53 per cent in 2022.