Bengaluru: Mumbai, India’s most expensive property market, showed the maximum improvement in affordability among top eight cities, along with a reduction in average home sizes since 2010, property advisory Knight Frank India’s latest Affordability Index showed. The report, which assesses the affordability of homes, said average home sizes in Mumbai have shrunk by 24%.
While it still remains India’s most expensive housing market and the least affordable, the report estimated that a house will cost around seven times the annual household income, against 11 times in 2010.
This figure has come down to five times for the National Capital Region (NCR) and Hyderabad, compared with six times in 2010. In Bengaluru, it was four times in 2018 from six in 2010.
Considering that "ideal affordability" is identified at 4.5 times the average annual household income in a city, barring Mumbai (7), NCR (5) and Hyderabad (5), all other markets are below the benchmark. Mumbai, while still recording the highest ratio, has experienced the sharpest improvement since 2010.
The fall in home prices to income ratio in all eight cities, including Mumbai, NCR, Bengaluru, Kolkata, Chennai, Ahmedabad, Hyderabad and Pune, signals rising affordability, on the back of a correction in property prices and a reduction in home sizes.
“This indicates that prices have corrected significantly while income has grown at a slow base. Prices per square foot may not have dropped drastically, but majority (60%) of the new supply of housing stock coming in is in the affordable range along with reducing home sizes," said Arvind Nandan, executive director-research, Knight Frank India.
As the residential market undergoes a churn, it is the customer who is calling the shots, forcing developers to customize products and pay attention to what buyers really want.
Compact homes in the mid-income category and the government’s Housing for All initiatives are increasingly making the affordable housing segment seemingly lucrative for even large, established developers.
Nandan said the new residential supply is coming in areas and categories showing customer demand.
Besides falling prices, the report notes that there is a sharp decline in average home sizes of residential units at launch, which has contributed to growing affordability. Average home sizes have shrunk by 24% in Pune, by 18% in Bengaluru and 17% in Kolkata since 2010.
Hyderabad (+4%) and Ahmedabad (+7%) are the only two cities offering larger homes.
Annual apartment sales peaked in 2011, but since then, recorded consistent year-on-year decline till 2017, pushing up unsold inventory levels and forcing developers to re-strategize.
Bengaluru is the only city where annual home sales increased from 28,318 units in 2010 to 43,775 units in 2018.
“...A decline in average ticket size and focus on affordable housing have improved home affordability across the country to a large extent. The fact that affordability statistics have moved dramatically since 2010 explains why sales have finally improved in 2018," said Shishir Baijal, chairman and managing director, Knight Frank India.