Ahmedabad Tops Affordability Index: Knight Frank Report
Real estate consultancy Knight Frank has revealed that Ahmedabad stands as the most affordable city in India according to its recently released Affordability Index. The index is based on the ratio of equated monthly installments (EMIs) to income for an average household, providing insight into the housing affordability of major cities.
During the first half of 2023, Ahmedabad boasted the lowest ratio among the top eight Indian cities at 23 percent. This was followed closely by Pune and Kolkata with ratios of 26 percent each. These ratios reflect the proportion of an average household’s income dedicated to EMI payments.
On the other hand, Mumbai emerged as the least affordable city with a ratio of 55 percent, followed by Hyderabad at 31 percent and the National Capital Region at 30 percent.
The rise in the benchmark repo rate by the Reserve Bank of India (RBI) over the past year has led to a 2.5 percent average increase in affordability across cities, pushing EMI loads up by 14.4 percent. Despite this, the demand for real estate has remained strong and steady, maintaining the multi-year highs experienced in the first half of 2023.
Chairman and Managing Director of Knight Frank India, Shishir Baijal, expressed confidence in the RBI’s management of inflation, noting its positive impact on the country’s economic environment. This confidence is mirrored in the thriving residential demand and the resilience of office demand, even in the face of global market challenges.
The real estate market’s demand has not only stayed high, but its composition has evolved. The mid and premium segments in the price range of Rs 50 lakh to Rs 1 crore and above Rs 1 crore, respectively, have outperformed the overall market. In contrast, sales in the under Rs 50 lakh category have declined.
This shift is attributed to homebuyers in the lower segment relying heavily on home loans and being more sensitive to rate hikes compared to those in the mid and premium segments. The mid-segment’s sales have even surpassed the affordable segment, while the premium segment is rapidly catching up.
While the market has demonstrated resilience thus far, further increases in interest rates could potentially impact homebuyer ability and sentiments, cautioned Baijal.
