New Delhi: Affordability of homes has increased across cities in India largely on the back of low home loan rates, said a JLL report.
It also showed that property values in a majority of India's prime residential markets have been stagnant over the past few years, forcing most of the developers to work on very low margins.
As per JLL's analysis, affordability has increased across all cities between 2011 and 2020. Despite a bigger fall in annual household income as compared to the residential prices, affordability increased in 2020.
"A sharp decrease in the cost of funding - average home loan rates reduced from around 8.9 per cent in 2019 to 7.5 per cent in 2020, more than offset the adverse impact of lower incomes on affordability," it said.
The report noted that household incomes have witnessed steady growth in the past decade. The growth in household income has been consistently higher than the growth in house prices since 2011, it said.
The report noted that the current year has been an exception. Few developers in certain markets are providing moderate price discounts to facilitate cash flows in the short run. Moreover, developers are offering various freebies such as no EMIs for a year, no stamp duty among others to attract prospective homebuyers.
This has resulted in a marginal dip in residential prices in certain markets. While prices remained stagnant in the southern cities of Bengaluru and Hyderabad, the other markets under review witnessed a dip of 1-3 per cent in effective prices. At the same time, an unprecedented rise in unemployment, coupled with salary cuts during the year led to incomes decreasing (4-7 per cent dip) by a greater proportion in all the markets.
Housing Purchase Affordability Index (HPAI) is the ratio of the average household income to the eligible household income. Eligible household income is defined as the minimum income that a household should earn in order to qualify for a home loan on a 1,000 square feet apartment at the prevailing market price.
It noted that once the revival of the economy starts and prospective buyers feel secure about their future income flows, sales of residential units is expected to witness an uptick.
As per the JLL report, home purchase affordability in 2021 is expected to either remain at similar levels or improve from the levels of 2020.
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