Uncompleted residential apartments in Greater Noida, near New Delhi. Photo: AFP

Affordability to buy homes in India’s major cities has improved this year, says property consultant Jones Lang LaSalle India.

In its annual Home Purchase Affordability Index, it stated that between 2013 and 2021, affordability increased consistently across key Indian cities – Delhi-NCR, Mumbai, Kolkata, Chennai, Pune, Hyderabad and Bangalore.

The index signifies whether a household earning an average annual income – at an overall city level – is eligible for a housing loan on a property in the city, at the prevailing market price.

It pointed out that during the current year, household incomes in all the key cities grew 7%-9% from the low base of 2020 when the pandemic-induced lockdowns led to a contraction of the economy. On the other hand, home prices remained stagnant in all cities except Hyderabad.

On top of that, with mortgage rates at a 15-year low, homebuyers had to pay reduced EMIs, which had a “significant bearing on affordability,” it observed. The country’s largest housing finance company, Housing Development Finance Corporation, State Bank of India and Bank of Baroda slashed rates up to 40 basis points to woo home buyers during the October-December festive season.

The property consultant said India’s most expensive property market Mumbai witnessed a significant rise in the home affordability index and may breach the affordability threshold of 100 this year. The index is defined as the ratio of the average household income to the eligible household income.

Eligible household income is defined as the minimum income that a household should earn in order to qualify for a home loan on a 1,000 square feet apartment at the prevailing market price.

A value of 100 means that a household has exactly enough income to qualify for the loan. A value less than 100 implies that an average household does not have enough income to qualify for a housing loan.

According to the report, Kolkata is the best market in terms of home purchase affordability as its index is estimated to be 218 from 201 in the last calendar year. The other market that may surpass the 200-mark is Hyderabad (203), while Pune will come close to it (198).