Affordability Index 2020 of Knight Frank India, a leading international property consultancy, cited Ahmedabad as the most affordable housing market in the country with an affordability ratio of 24% followed by Pune and Chennai at 26% each in 2020.
Knight Frank’s proprietary Affordability Index, which tracks the EMI (Equated Monthly Instalment) to income ratio for an average household, has shown meaningful improvement in affordability over the last decade. Even in the pandemic year of 2020, housing affordability has further improved. Decline in house prices and multi-decade low home loan interest rates have helped improve housing affordability in 2020. While Mumbai is the most expensive market, with affordability ratio of (61%), other cities like Ahmedabad, Chennai and Pune are relatively more affordable. Even for Mumbai, the affordability ratio has improved from a high of 93% in 2010 to 61% in 2020.
The Knight Frank Affordability index captures movement in key constituents like property prices, home loan interest rate and household income that determine the buyer’s ability to purchase a house. City-wide average affordability statistics cannot highlight disparities in housing costs within sub-markets or across the income spectrum. A ratio over 50% makes it difficult to secure home loans from banks and housing finance companies making it unaffordable to purchase a house.
| City | EMI to income ratio | |
| 2010 | 2020 | |
| Mumbai | 93% | 61% |
| NCR | 53% | 38% |
| Bengaluru | 48% | 28% |
| Pune | 39% | 26% |
| Chennai | 51% | 26% |
| Hyderabad | 47% | 31% |
| Kolkata | 45% | 30% |
| Ahmedabad | 46% | 24% |
Source: MOSPI, Knight Frank Research
Shishir Baijal, Chairman and Managing Director, Knight Frank India said, “The affordability ratio across top eight cities has improved tremendously over this decade due to an increase in income level, lower interest rate and subsequently lower property prices. Government interventions around improved credit flow, lower interest rate and cut in stamp duty rate in some markets has brought confidence among homebuyers in 2020. We believe a combination of best in decade affordability level and pick-up in economy will serve as key catalysts for the country’s housing market next year.”