Home purchase affordability has improved consistently across key property markets over the last 8 years since 2013 owing to increase in household incomes, housing prices leading to time correction and lower mortgage rates, showed a recent real estate services company of India report.

During the current year, household incomes witnessed a sharp increase of 7%-9% from the low base of 2020. Mortgage rates continue to trend at their lowest in 15 years, thereby leading to reduced housing loan instalments for homebuyers, thereby having a significant bearing on affordability, the consultant of the services company said.

Mumbai, India’s most expensive property market, has witnessed a significant rise in home affordability index, breaching the affordability threshold of 100 this year. In 2020, Kolkata overtook Hyderabad to become the best market in terms of home purchase affordability.

According to them, the current year is expected to witness Hyderabad surpass the 200-mark on the affordability index followed closely by Pune. The index indicates that an average income earning household in the markets of Hyderabad and Kolkata has enough income to qualify for a home loan on two 1,000 sq. ft apartments (or one 2,000 sq. ft apartment) at the prevailing market price.

“The housing market was expected to chart a new growth trajectory in 2021 and the year started on a positive note. In Q1 2021, sales of residential units increased by 17% while new launches increased by 27% on a sequential basis. Despite a sluggish Q2 2021, when sales and launches fell amid lockdown restrictions, the residential market is primed for a robust recovery period,” said the company spokesperson.

According to him, the housing landscape has improved massively in terms of transparency and the market is now steeped in sound fundamentals. The improving trends in affordability can be an important feeder into the strategic decision making of real estate developers and policy makers

“Our analysis suggests that as demand increases, the flexibility being offered by developers is expected to reduce and prominent developers might even raise prices in new launches as the market sentiment further recovers. In this scenario, the residential price curve is expected to move up across all the markets. Mortgage rates are unlikely to go up significantly since the central bank will continue to boost consumer spending. Resultantly, home purchase affordability in 2022 is expected to either remain at similar levels or witness a marginal improvement from the levels of 2021,” said the Chief Economist and Head of Research of the company.

While affordability is necessary when determining home purchases, it is not sufficient to drive sales. A homebuyer will always investigate the prevailing economic condition, employment scenario and future income flows.

The housing landscape has improved massively in terms of transparency and the market is now steeped in sound fundamentals. The trends in affordability can be an important feeder into the strategic decision making of real estate developers and policy makers. Increasing affordability when combined with policies directed towards improving the economic outlook goes a long way in improving the overall health of the residential market said the company spokesperson.

Source: economictimes.indiatimes.com/industry/services/property