Mortgage Rates

Housing affordability improves in key cities on time correction, low mortgage charges: Report


The affordability of buying a home has steadily improved over the past 8 years since 2013 in all major property markets due to rising household incomes, stagnating property prices leading to time corrections, and lower mortgage rates, according to a report from JLL India.

This year household incomes have seen a sharp 7% to 9% increase from the 2020 low, while house prices have stagnated in all of India’s leading residential markets except Hyderabad. In addition, mortgage rates continue to trend at their lowest level in 15 years, resulting in lower home loan rates for homebuyers, which has a significant impact on affordability, the adviser said.

The second wave of COVID-19 dented the market after a good recovery curve. Compared to the same period in the previous year, however, the effects were muted. It is important that the lockdown restrictions in the cities are relaxed and the vaccination campaign gains momentum. Most of the changes in this sector have been structural and demand for home ownership is only expected to increase.

Mumbai, India’s most expensive real estate market, saw its home affordability index spike significantly, exceeding 100 this year, according to the JLL 2021 Home Affordability Index. In 2020, Kolkata overtook Hyderabad and became the best market in terms of home affordability buy.

According to JLL, Hyderabad is expected to break the 200 mark on the Affordability Index this year, closely followed by Pune. The index indicates that an average-income household in the Hyderabad and Kolkata markets will have enough income to qualify for a home loan for two 1,000-square-foot homes (or one 2,000-square-foot home) at the prevailing market price.

“The housing market should embark on 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 startups increased sequentially by 27%. But the situation changed suddenly in the second quarter when the second wave of the pandemic caught the nation unprepared. Despite a sluggish second quarter of 2021, when sales and launches declined due to lockdown restrictions, the residential real estate market is poised for a robust recovery, ”said Siva Krishnan, Managing Director, Residential Services, India, JLL.

According to him, the real estate landscape has improved massively in terms of transparency and the market is now permeated with solid fundamentals. The improving trends in affordability can be an important source of strategic decision-making for property developers and policy makers

“Our analysis suggests that as demand increases, the flexibility offered by developers is likely to decrease, and prominent developers could even raise prices for new product launches if market sentiment continues to recover. In this scenario, the housing price curve is expected to move up across all markets. Mortgage rates are unlikely to rise significantly as the central bank continues to stimulate consumer spending. As a result, home ownership affordability is expected to either remain at a similar level in 2022 or improve slightly from the 2021 level, ”said Samantak Das, Chief Economist and Head of Research & REIS (India), JLL.

While affordability is necessary in making the decision to buy a home, it is not enough to drive sales. A homebuyer will always examine the prevailing economic climate, employment scenario, and future income streams.

The real estate landscape has improved massively in terms of transparency and the market is now characterized by solid fundamentals. The trends in affordability can be an important source of strategic decision-making for property developers and policymakers. Increasing affordability, combined with measures to improve economic prospects, goes a long way towards improving the overall health of the housing market.