Mumbai Witnesses Significant Rise in Home Affordability Index
Mumbai, India’s most expensive property market, has witnessed a significant rise in home affordability index, breaching the affordability threshold of 100 in 2021, said the annual Home Purchase Affordability Index. In 2020, Kolkata overtook Hyderabad to become the best market in terms of home purchase affordability. The year 2021 is expected to witness Hyderabad surpass the 200-mark on the affordability index followed closely by Pune. The annual Home Purchase Affordability Index (JLL HPAI 2021) shows that between 2013 and 2021, affordability has increased consistently across key Indian cities which were part of the Index. During the current year, household incomes witnessed a sharp increase of 7-9 percent (from the low base of 2020) in the markets under consideration, the report said. At the same time, home prices remained stagnant in all of India’s prime residential markets except for Hyderabad. The index indicates that an average income earning household in the markets of Hyderabad and Kolkata has enough income to qualify for a home loan on two 1,000 sq. ft apartments (or one 2,000 sq. ft apartment) at the prevailing market price. “The housing market was expected to chart a new growth trajectory in 2021 and the year started on a positive note. In Q1 2021, sales of residential units increased by 17 percent while new launches increased by 27 percent on a sequential basis. But the situation changed abruptly in the second quarter as the second wave of the pandemic hit the nation unprepared. "Despite a sluggish Q2 2021, when sales and launches fell amid lockdown restrictions, the residential market is primed for a robust recovery period. The housing landscape has improved massively in terms of transparency and the market is now steeped in sound fundamentals. The improving trends in affordability can be an important feeder into the strategic decision making of real estate developers and policy makers. Our analysis suggests that as demand increases, the flexibility being offered by developers is expected to reduce and prominent developers might even raise prices in new launches as the market sentiment further recovers. In this scenario, the residential price curve is expected to move up across all the markets ,” said Siva Krishnan, Managing Director, Residential Services, India, JLL. “Mortgage rates are unlikely to go up significantly since the central bank will continue to boost consumer spending. Resultantly, home purchase affordability in 2022 is expected to either remain at similar levels or witness a marginal improvement from the levels of 2021,” said Samantak Das, Chief Economist and Head of Research & REIS (India), JLL.
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