Ahmedabad, Pune and Kolkata topped as the most affordable real estate markets in India

Amid higher home loan interest rates, Ahmedabad, followed by Pune and Kolkata topped the charts in terms of real estate affordability during the first half of 2023, according to a new report released by Knight Frank India. The consultancy’s affordability index tracked the EMI (equated monthly instalment) to income ratio for an average household in the top eight cities of India.

“Higher home loan rates have reduced affordability across all markets so far in 2023,” the report highlighted. In order to tame inflation, the Reserve Bank of India increased its base lending rate (to banks)- repo rate -by 250 basis points during FY23 to 6.5 percent currently. Accordingly home loan interest rates have risen to even breach the 8.5 percent mark in some cases. “This has impacted affordability by an average of 2.5 percent across cities and increased the EMI load by 14.4 percent since then,” the report noted.

However, overall demand has remained unimpaired, with the mid and premium housing segments leading the market. Home buyers in the affordable segment (under Rs 50 lakh) have a higher dependence on home loans and are therefore more sensitive to rate hikes, the report reasoned.

“The mid and premium segments in the residential market have been consistently outperforming and points to a significant shift in the market’s underlying fabric,” said Knight Frank India Chairman and Managing Director Shishir Baijal, adding that while the market has remained strong thus far, further interest rate increases could put pressure on homebuyer ability and sentiments.