Every coin has two sides. Pandemic has caused pain dearly to a lot of business owners. At the same time, it has given a metaphoric salary rise to a lot of techies. And even though this pandemic halted the growth of the real estate business, it has been a boon for prospective home buyers. The affordability of houses has increased in many cities throughout the country.
Here, we bring you the list of cities which you can consider for investing in real estate.
Ahmedabad is the most affordable housing market in the country
According to the ‘Affordability Index 2021’ published by Knight Frank, indian property markets are at their decadal best in terms of housing affordability, wherein all cities, barring Mumbai, have been recorded as being well below the threshold of affordability set at 50% ratio.
In this report, Ahmedabad emerged as the most affordable housing market in the country with an affordability ratio of 20% followed by Pune and Chennai at 24% and 25% respectively.
Mumbai, which had an affordability index of 92% in 2016 has improved the most since 2011. It has recorded a higher than threshold affordability ratio at 53%. It should be noted that the affordability ratio in Bengaluru improved from 57% in 2012 to 26% in 2021 while the ratio in NCR improved from 38% in 2020 to 28% in 2021.
The Affordability Index has an influence on your ability to take a loan
It should be noted that the Affordability Index captures changes in property prices, home loan interest rate, and average household income to determine buyers’ ability to purchase a house in a given city. Since banks underwrite home loans when the EMI to income ratio is below 50%, existing income and average ticket-size metrics across seven of eight markets make it possible for a homebuyer to easily finance their home purchase.
The Knight Frank Affordability Index shows us the proportion of income that a household requires, to fund the monthly installment (EMI) of a housing unit in a particular city. Hence, the Affordability index level of 40% for a city implies that on average, households in that city need to spend 40% of their income to fund the EMI of housing loan for that unit. At the same time, An EMI/ Income ratio over 50% is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage.
Therefore, this is, a great time for potential buyers to purchase a home given that all factors are conducive.
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