New Delhi: For those currently dreaming of buying a home and considering which city offers the most affordable option, there’s good news. According to the latest report from Knight Frank India, Ahmedabad, Gujarat, has emerged as the most affordable housing market among India’s eight major cities. Homebuyers in this city are paying the smallest proportion of their monthly income in EMIs.
The report indicates that the impact of the Reserve Bank of India’s (RBI) reduction in the repo rate is now clearly visible in the country’s housing sector. This has led to cheaper home loans and a reduction in interest burden for borrowers, resulting in relief in EMIs and an increase in home-buying affordability.
Repo Rate Cut Boosts Purchasing Power
At the beginning of this year, the RBI cut the repo rate by 1.00 percent, leading to a decline in interest rates on home loans. This made borrowing cheaper and reduced EMIs. Consequently, affordability for buying homes has improved in seven of India’s major cities.
The repo rate cut has benefited not only new loans but also existing homeowners, who are experiencing relief in their EMIs, allowing them to better plan their finances for other financial needs.
What is EMI/Income Ratio?
The EMI/Income ratio referred to in the report indicates the proportion of a family’s monthly salary that is spent on paying their home loan EMI. For example, if the ratio in a city is 30 percent, it means that the family in that city spends 30 percent of their monthly income on housing installments.
Generally, if this ratio exceeds 50 percent, it is considered financially burdensome and potentially risky. In this context, an EMI/Income ratio of 18 percent in Ahmedabad is considered extremely secure and affordable.
Ahmedabad Most Affordable, Mumbai Most Expensive
The report labels Ahmedabad as the most affordable city. Here, a family only needs to spend 18 percent of their monthly salary on their home EMI. This means that buying a home in this city is significantly easier and more accessible than in other metropolitan areas.
Conversely, Mumbai is at the top of the list as the most expensive housing market in the country. Its EMI/Income ratio is 48 percent, meaning that families living in this city spend more than half of their monthly income on housing installments.
Situation in Other Cities
This report includes eight major cities in India. Seven of these cities have seen an improvement in home-buying affordability. Here’s how these cities fared:
- Pune: The EMI/Income ratio here is 22 percent, making it a relatively affordable option, particularly for the middle class.
- Kolkata: The ratio is 23 percent, indicating that buying a home in Kolkata is also comparatively easier.
- Delhi-NCR: The ratio in the capital and surrounding areas is 28 percent, considered a balanced situation.
- Hyderabad: The ratio is 30 percent, meaning that while the EMI might be slightly higher, it’s still considered affordable.
- Chennai and Bangalore have ratios around 32-35 percent, which are neither excessively burdensome nor overly cheap.
Buying a Home Has Become Slightly Easier
Thanks to the repo rate cut and lower interest rates, buying a home is becoming slightly easier for middle-class families. Particularly in cities like Ahmedabad, where property prices are relatively low, buying a home is now a more practical option.
The changing economic landscape, simplified loan processes, and incentives offered by real estate developers are contributing to a more active housing market. Government initiatives like the Pradhan Mantri Awas Yojana (Prime Minister’s Housing Scheme) are also playing a role.
