Hyderabad has emerged as India’s second most expensive residential market, with households allocating 30% of their income towards home loan EMIs, according to Knight Frank India’s Affordability Index 2024.
Affordability Index Insights
The Affordability Index measures the proportion of income that households in various cities spend on housing loan EMIs. An EMI-to-income ratio below 50% is considered affordable. Hyderabad’s ratio has remained steady at 30% over the past three years, indicating consistent housing affordability challenges.
Comparison with Other Cities
Mumbai tops the list as the least affordable housing market in India, with an EMI-to-income ratio of 50%. In contrast, Ahmedabad is the most affordable, with a ratio of 20%, followed by Pune (23%), Kolkata (24%), Chennai (25%), and Bengaluru and the National Capital Region (NCR) at 27%.
Factors Influencing Housing Affordability
Several factors contribute to housing affordability, including property prices, interest rates, and household incomes. Between 2010 and 2021, affordability improved due to lower interest rates and economic growth. During the COVID-19 pandemic, the Reserve Bank of India (RBI) reduced the policy repo rate to historic lows, further enhancing affordability. However, to combat inflation, the RBI increased the repo rate by 250 basis points between May 2022 and February 2023, temporarily tightening affordability. Since then, the repo rate has remained unchanged, and rising household incomes have helped maintain affordability levels despite increasing property prices.
Implications for Homebuyers and the Real Estate Market
The consistent 30% EMI-to-income ratio in Hyderabad suggests that while the market remains expensive, it has not worsened over the past three years. For potential homebuyers, this underscores the importance of careful financial planning and consideration of long-term income stability when entering the housing market. For developers and policymakers, these findings highlight the need for initiatives that can enhance affordability, such as increasing the supply of affordable housing and implementing supportive fiscal policies.
In conclusion, Hyderabad’s position as the second most expensive housing market in India reflects broader trends in urban housing affordability. While the city’s EMI-to-income ratio has remained stable, ongoing efforts are essential to address affordability challenges and ensure sustainable growth in the residential real estate sector.
