Want a house that fits in your budget? 5 most affordable cities in India to buy home now

Source: Economic Times

Which is the most affordable city in India? There are various parameters to gauge the affordability level of a place. However, since there is no strict benchmark that can define what price could be affordable, it is difficult to claim a single affordability level for all cities. The Affordability Index by Knight Frank India could be one such benchmark which reveals the property markets that are affordable. According to the Affordability Index, Ahmedabad has emerged as the most affordabe housing market in the country among major cities in 2023. It has recorded an affordability ratio of 21% — a household in Ahmedabad needs to spend 21% of its household income to pay Equated Monthly Instalments (EMIs) on average, the report said.

Pune and Kolkata followed with 24% each in 2023. The ratio level of Kolkata has improved by 1% from 2022 and by 8% from the pre-pandemic year of 2019. The affordability ratio of Chennai has improved by 2% from 27% in 2022 to 25% in 2023. It secured fourth place in the Affordability Index.

Despite higher home loan interest rates in the last year, the affordability ratio showed a positive trend in 2023. While marginally better than last year, home affordability across cities also significantly improved since the pre-pandemic year of 2019, showed Knight Frank India data.

The Affordability Index indicates the proportion of income that a household requires to fund the EMI of a housing unit in a particular city. Thus, an affordability index level of 40% for a city implies that on average, households in that city need to spend 40% of their income to fund the EMI of a home loan for a unit. An affordability index level of over 50% is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage. The affordability index can rise either due to reduction in prices or due to rise in average income of the city or sometimes both.

Mumbai is the only city beyond the affordability threshold of 50%, a level exceeding which banks rarely underwrite a mortgage. "The most expensive residential market of the country, Mumbai, has however seen an improvement of 2% in its affordability index measured at 51% in 2023 from 53% in 2022. Looking at the trend from the pre-pandemic period, the city has witnessed a significant improvement of 16% in its affordability levels from 67% in 2019," the report said.