HYDERABAD: With developers raising realty prices over the last two years, and banks charging higher interest rates, Hyderabad has become the second-most expensive housing market in the country, after Mumbai. Knight Frank India, in its proprietary affordability index, says that higher home loan rates have adversely impacted affordability in 2023. The index says that Hyderabad is the second-most expensive market with an EMI (Equated Monthly Instalment) to income ratio of 31 per cent. In H1 2023, Hyderabad witnessed a one percentage increase in the ratio, up from 30 per cent in 2022.
As per the assessment of the affordability index, despite the change, Ahmedabad remains the most affordable housing market amongst the top eight cities, with a ratio of 23 per cent followed by Pune and Kolkata at 26 per cent each. Knight Frank’s affordability index tracks the EMI to income ratio for an average household, which has witnessed a steady increase from 2010 to 2021 across the eight leading cities of India, especially during the pandemic when the Reserve Bank of India (RBI) cut REPO rates to decadal lows.
Shishir Baijal, chairman and managing director, of Knight Frank India, said: “The RBI’s extremely capable handling of the inflationary scenario has inspired confidence in the country’s economic environment. This is also reflected in the residential demand which is at a multi-year high and office demand which has remained resilient even as office markets globally have been struggling. The mid and premium segments in the residential market have been consistently outperforming and point to a significant shift in the market’s underlying fabric. However, the 250 bps increase in policy rates has reduced affordability across markets by 2.5 per cent on an average.”
The index indicates the proportion of income that a household requires to fund the monthly EMI of a housing unit in a particular city. Accordingly, a Knight Frank affordability index level of 40 per cent for a city implies that on average, households in that city need to spend 40 per cent of their income to fund the EMI of housing loan for that unit. An EMI/income ratio over 50 per cent is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage.