Ahmedabad, followed by Pune, are amongst the most affordable cities in India, in terms of housing, as per consultancy firm, Knight Frank India.

Seven of the eight major markets – Delhi-NCR, Bengaluru, Pune, Ahmedabad, Hyderabad, Kolkata and Chennai – have recorded an affordability index below 50 per cent – the threshold limit. Mumbai was the exception with an affordability index of 53 per cent.

The Knight Frank Affordability Index indicates the proportion of income that a household requires to fund the equated monthly instalment of a housing unit in a particular city.

Affordability index level

An affordability index level of 40 per cent implies that on an average, households need to spend 40 per cent of their income towards EMI.

An index of above 50 per cent is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage.

Ahmedabad had an affordability ratio of 20 per cent, Pune 24 per cent, Kolkata and Chennai 25 per cent.

Mumbai, despite having a 53 per cent affordability index saw a significant improvement in affordability, compared to 2011 when it was 100 per cent.

Down from peak levels

Delhi-NCR affordability index was 28 per cent (down from its 2012 peak of 70 per cent), Bengaluru 26 per cent (down from its 2012 peak of 57 per cent) and Hyderabad 29 per cent (down from its 2011 peak of 53 per cent).

According to Shishir Baijal, CMD, Knight Frank India, for most part of the last 5-6 years residential prices corrected leading to better affordability, however, the recent reduction in home loan interest rate to below 6.5 per cent has been a deciding factor in the significant improvement in home affordability in the last 24 months.

“A combination of best affordability levels and a pick-up in economy will serve as key catalysts for the country’s housing market next year,” he said.