As good times don’t last forever, the time is ripe for home seekers to buy their aspired home in India. Home Purchase Affordability Index indicates that between 2013 and 2021, affordability increased consistently across key Indian cities, making home purchase more conducive.
Housing affordability is the ratio of the annual median family income to the annual necessary income.Earlier, the average cost of buying a home used to be equal to seven years of the home seekers’ income, which has now reduced to between five years.
With steady economic recovery, resumption of sectoral activities, fresh hiring gaining momentum, and festive bonanza played a catalyst role fueling home buying. The uptick in sales velocity and record high property registrations coins in with home affordability scenario. The most expensive city of Mumbai has witnessed a noticeable rise in home affordability index in the last few years.The interplay between property price, income and mortgage rates impacts the ability of a household to afford a home purchase.
Demand stimulus
Indian Property market was ailing from slowdown, subdued demand, muted investment, and liquidity crisis for a while now. The COVID pandemic didn’t spare real estate sector unscathed from its menace; it acted as a demand stimulus by underpinning the value of owning a house. The value of own safe nest triggered a sense of stability and security it offers in volatile market cycles. It induced long-time renters to enter the home-buying zone and current homeowners took plunge to upgrade to a better and larger apartment with new normal lifestyle.
FavorableHome Affordability Index is outcome of multiple factors like price rationalisation, interest rates are accommodative and decadal low, low-cost credit for home-buying, customised payment flexi plans, low EMI, bouquet of services offered by banking and non-banking financial institutionsignificantly impacting ‘affordability’. Especially since a majority of home-buying in India, a whopping 90%, happens with a mortgage as per media.
Fresh hiring
India’s GDP growth curve is on upward curve, with fresh hiring on spree, employment generation, restoration of pay cut as business operations gains traction, and vaccination drive catching up in the backdrop, bringing life and economy to normalcy. The year-on-year average consumer inflation index also shows a positive effect.
As consumer confidence index rebounds, home-buying demand hastaken offto new heights with a large number of actual home buyers entering the property market. Investment from the domestic as well as international NRI investors have been garnering momentum. It marks an ideal time for investors and end users to buy house in India. COVID crisis has ingrained the fact that need for home is perennial and this will lead to sustainable home-buying demand. Increase demand has resulted in dip of an overhang unsold stock. The unsold inventory levels have dropped from 5 years to 1.5 years, which nudge developers to gear up for new project launches. Demand for ready-to-move-in has been preferred, but fence sitters are closing transactions in under-construction projects from branded developers. Trend of market consolidation gives a cutting edge to organised branded players to widen its market share across micro markets and housing segments. The market witnesses spike in demand for mid and luxury housing in the wake of upgradation to spacious apartments in a community living township with ample social and civic amenities. Location with ease of connectivity is a prime factor for demand generation and a slew of mega infrastructure projects in the pipeline will script the growth story of real estate landscape.
Media reports suggest that home loan rates have started stabilising and home prices have bottomed out; so, the affordability aspect may get impacted. This is a point for home seekers to note — they should take the decision and buy their home before the market scenario transit.
The writer is National Vice Chairman, NAREDCO, and MD, Hiranandani Group.
