Real Estate Bull Run Impacting Affordability

New Delhi, September 5, 2024 – The Indian real estate market is currently in the midst of a bull run, with property prices soaring and demand escalating across major cities. Despite a rise in household incomes in the top 10 cities at a Compound Annual Growth Rate (CAGR) of 5.4%, property prices have surged even higher, growing at a CAGR of 9.3% between 2020-2024. This disparity has weakened housing affordability across the country.

Property Price to Annual Household Income Ratio Increases

According to Magicbricks’ latest report, “Housing Affordability in Major Indian Cities,” the Property Price to Annual Household Income Ratio (P/I Ratio) has increased from 6.6 in 2020 to 7.5 in 2024. This figure surpasses the globally accepted affordability benchmark of 5. The report identifies Chennai, Ahmedabad, and Kolkata as the most affordable metros for residential investments in 2024, each with a P/I Ratio of 5. On the other hand, the Mumbai Metropolitan Region (MMR) and Delhi have emerged as the least affordable metros, with ratios of 14.3 and 10.1, respectively.

Sudhir Pai on Market Trends and Affordability Challenges

Commenting on the trends, Sudhir Pai, CEO of Magicbricks, highlighted that the period between late 2021 and 2022 marked the most affordable phase for residential investments. “During this time, the market was in resurgence, characterized by low interest rates, recovering household incomes, and modest price increases. However, demand has since outstripped supply, causing a steep rise in property prices, which presents new challenges for affordable housing,” Pai noted.

Rising EMI Burdens on Homebuyers

The report also sheds light on the growing burden of Equated Monthly Installments (EMI) for homebuyers. The EMI-to-monthly income ratio has risen from 46% in 2020 to 61% in 2024, indicating increased financial pressure on buyers. This trend is especially concerning in metros like MMR (116%), New Delhi (82%), Gurugram (61%), and Hyderabad (61%). In contrast, cities such as Ahmedabad (41%), Chennai (41%), and Kolkata (47%) remain relatively more affordable.

Market Outlook: Stabilizing Price Growth

Looking ahead, the report predicts that the market will likely reach an equilibrium, with an expected deceleration in property price growth due to an anticipated increase in residential supply. This could offer some relief to buyers in the near future.