Hyderabad 2nd most expensive residential market

Hyderabad: Hyderabad currently stands as the second most expensive residential market in the country, next only to Mumbai. With increase in residential prices and stagnant income levels of the households, home buying affordability level in the city declined from 53 per cent in 2011 to 30 per cent now, said property consultant Knight Frank India.

In its annual proprietary study 'the Affordability Index 2022,' the property consultant pointed out that home buying affordability levels in Indian markets including Hyderabad have declined in 2022 compared to 2021.

From 53 per cent in 2011, the home purchase affordability index in Hyderabad improved to 34 per cent in 2019. With the onset of pandemic in early 2020, the affordability index further improved to 28 per cent in 2021. However, the increase in repo rate in 2022 and the consequent increase in home-loan rates, along with increase in residential prices has led the affordability level of the city to currently stand at 30 per cent.

"Despite the rise in Repo rate by 225 bps (basis points) in 2022 and the increase in home prices, home affordability has only marginally reduced by 100 to 200 bps in major cities," Shishir Baijal, Chairman and Managing Director of Knight Frank India, said.

Affordability levels for buying homes across eight major cities slightly declined this year due to a rise in mortgage rate, but the total income for an average household is adequate for securing home loans in all markets except Mumbai.

He further added that the severity of the impact of rise in home loan rates and in prices on the affordability index has been cushioned by a rise in incomes and growth in GDP, helping the residential market maintain its momentum.

The index, which tracks the EMI (Equated Monthly Installment) to total income ratio for an average household, captures movement in key constituents like property prices, home loan interest rate and average household income to determine the buyers' ability to purchase a house. Banks generally underwrite home loans when the EMI to Income ratio is under 50 per cent, and this is deemed to be the threshold for affordability by the index.

Knight Frank India said that the cumulative increase in repo rate by 225 basis points during 2022 and the consequent increase in home-loan rates, along with an increase in residential prices caused the decline in affordability. While affordability levels in 2022 have worsened compared to 2021, they remain significantly better than the pre-pandemic levels in 2019.

"All markets, except Mumbai, are recorded to be well below the threshold of comfortable affordability set at 50 per cent ratio. Ahmedabad emerged the most affordable housing market in the country with an affordability ratio of 22 per cent followed by Kolkata and Pune at 25 per cent each in 2022. Mumbai was the only one that recorded higher than threshold affordability ratio at 53 per cent." Affordability levels in Mumbai have improved the most since 2011.