Housing affordability improves in major cities thanks to weather correction and low mortgage rates: report

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The affordability of buying a home has systematically improved in the main real estate markets in the last 8 years since 2013 due to the increase in household income, stagnation in house prices leading to a correction time and lower mortgage rates, a JLL India report showed.

In the current year, household incomes have seen a sharp increase of 7-9% from the low base of 2020, while house prices have remained stagnant in all major Indian residential markets, at except Hyderabad. In addition, mortgage rates continue to move to their lowest level in 15 years, resulting in reduced home loan payments for homebuyers, which has a significant impact on affordability, the said. consultant.

The second wave of COVID-19 rocked the market following a good recovery curve. However, the impact was lessened compared to the same period last year. Importantly, lockdown restrictions in cities are relaxed and the vaccination campaign is picking up steam. Most of the changes observed in the sector are structural in nature and the demand for housing is only expected to increase.

Mumbai, India’s most expensive real estate market, has seen a significant increase in the housing affordability index, surpassing the affordability threshold of 100 this year, JLL’s Accessibility Index 2021 showed. In 2020, Kolkata overtook Hyderabad to become the cheapest in terms of accommodation. affordable purchase.

According to JLL, the current year is expected to see Hyderabad surpass the 200 mark on the Accessibility Index, closely followed by Pune. The index indicates that a middle-income household in the Hyderabad and Calcutta markets has enough income to qualify for a home loan on two 1,000-square-foot apartments (or one 2,000-square-foot apartment) at the prevailing market price.

“The housing market was set to chart a new growth path in 2021 and the year started on a positive note. In the first quarter of 2021, residential unit sales increased 17% while new launches increased 27% on a sequential basis. But the situation changed abruptly in the second quarter as the second wave of the pandemic hit the country unprepared. Despite a sluggish Q2 2021, when sales and launches plummeted due to foreclosure restrictions, the residential market is poised for a strong period of recovery, ”said Siva Krishnan, Managing Director, Residential Services, India, JLL.

According to him, the real estate landscape has improved tremendously in terms of transparency and the market is now steeped in solid fundamentals. Trends in improving affordability can be an important element in the strategic decision-making of real estate developers and policy makers

“Our analysis suggests that as demand increases, the flexibility offered by developers should decrease and that major developers may even increase the prices of new launches as market sentiment picks up. In this scenario, the residential price curve should rise in all markets. Mortgage rates are not expected to rise significantly as the central bank will continue to stimulate consumer spending. As a result, the affordability of buying a home in 2022 is expected to either remain at similar levels or see a marginal improvement from 2021 levels, ”said Samantak Das, chief economist and researcher. and from REIS (India), JLL.

While affordability is necessary to determine home purchases, it is not sufficient to drive sales. A home buyer will always investigate the current economic situation, employment scenario, and future income streams.

The real estate landscape has improved considerably in terms of transparency and the market is now steeped in solid fundamentals. Affordability trends can be an important element in the strategic decision making of real estate developers and policy makers. Increasing affordability when combined with policies to improve economic prospects go a long way in improving the overall health of the residential market.


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