Kolkata, Hyderabad and Pune remain India’s most affordable residential cities: JLL
- Kolkata is the most affordable residential market in the country.
- Chennai and
Bengalurualso have relatively good affordability levels, but Mumbaimay soon slip below the threshold of an affordable market.
- It is becoming increasingly expensive to buy homes for buyers due to macroeconomic headwinds, inflationary pressures and rising input costs.
However, affordability levels are set to progressively fall for 2022 and 2023 as macroeconomic headwinds and inflationary pressures eat into household incomes, and residential prices rise as input costs are yet to be fully transmitted, JLL said. RBI’s Repo rate hike is yet another factor that will lower affordability levels, it added.
“Affordability levels are likely to trend down through the end of 2022 and thereafter in 2023 as well. Mortgage rates are likely to move up further to near 8-year highs. Price pressures and slower income growth are further likely to create a temporary glitch for affordability,” Samantak Das, chief economist, and head of Research and REIS, India, JLL said.
This would, however, be a temporary phase, and the momentum witnessed during 2013 and 2021 – when affordability increased consistently across the key seven cities – is likely to sustain.
“While affordability is likely to be impacted, the momentum-inhibitor looks to be a temporary one with India’s focus on economic growth and likely easing of inflationary pressures expected to reverse the current interest rate growth,” said
India’s most affordable housing cities in 2022
Kolkata, with a value of 192 is still on track to remain the most affordable residential market in the country among the top seven cities with Pune (183) and Hyderabad (174) close second. All three cities are likely to register lower affordability for 2022 and 2023, the report said.
“Mumbai has been the fastest-moving city in terms of its HPAI score improvement and became an affordable market with its threshold hitting 100. It is likely to slip below the threshold value of an affordable market but only slightly given all the macroeconomic headwinds and remain much above its HPAI low of 43 in 2013,” said JLL.
JLL Home Purchase Affordability Index (HPAI) signifies whether a household earning an average annual income (at an overall city level) is eligible for a housing loan on a property in the city, at the prevailing market price. A value of 100 means that a household has exactly enough income to qualify for a housing loan. Going below that marker means an average household does not have enough income to qualify for a housing loan.
Chennai (161) and Bengaluru (167) have relatively good affordability levels, the report added.
AdvertisementAffordability to still remain attractive
JLL Research’s analysis revealed that affordability was at its highest in 2021 with decadal low interest rates, attractive prices and household income recovery all coming together to create the perfect storm.
In 2022, affordability gains have been slightly mitigated as inflationary pressures have caused developers to pass on the rise in input costs to the buyers and the RBI’s repo rate hikes have resulted in higher home loan costs.
The current year is likely to see household incomes rise by an average of 7%. Residential prices have also risen driven by robust demand and pass-through of rising input costs onto homebuyers, with the price growth averaging 4-10% across the major cities, the report added.
“What remains pertinent is that we are coming off an 18-month period of a robust recovery in residential demand even as prices and interest rates have moved up during the latter part of this timeframe,” said Krishnan.
Advertisement“Affordability despite the estimates of a decline will still remain quite attractive and second best only to 2021,” he added.
SEE ALSO: Go after big smugglers sending 'mountains' of illegal drugs into the country: FM to enforcement agencies
India's services sector output growth hits 3-month high in Nov on strong demand
Check out upcoming new WhatsApp features in 2023
Popular on BI
- Sensex, Nifty slip for second day; FMCG, IT stocks drag
- Air India puts together 'huge financing deal' for new fleet: CEO
- Marine species including whales and dolphins under significant threat from noise pollution
- ITR filing: Your guide to Form 26AS and why you should check for TDS discrepancies
- A complete itinerary for your 3 days in Mount Abu