Get all your news in one place.
100’s of premium titles.
One app.
Start reading
Livemint
Livemint
National
Pooja Sitaram Jaiswar

Has price hikes, rising home loan EMIs impacted residential market in top 8 cities in 2022?

Despite price increases and rising home loan EMIs, the residential market continued to remain strong.

As per Knight Frank's real estate report, with steady momentum in sales volumes in H2 2022, residential prices also grew in the range of 1% to 3% across markets in H2 2022 compared to H1 2022. Bengaluru and Mumbai recorded a 3% rise in average residential prices while prices in Kolkata remained stable during the period.

The data revealed that overall in 2022, the price has gone up by 4% to 7% in these cities. Mumbai, NCR, Bengaluru, and Pune witnessed the highest price increase of 7% each in residential properties, while Chennai and Hyderabad saw a 6% upside each. Kolkata and Ahmedabad witnessed a 4% upside each in 12 months.

Knight Frank's report said that the high-end and mid-segment housing gained share in sales at the cost of the affordable segment in 2022, indicating some impact of deteriorating affordability at the price-sensitive segment.

Further, Knight Frank Affordability Index that tracks the EMI (Equated Monthly Instalment) to income ratio for households has declined across all cities during 2022. On this decline, Knight Frank attributed rising home loan rates and residential price hikes as the main reason.

It said, "The 225 bps repo rate hike and consequent increase in home loan rates along with higher residential prices are the primary drivers of this decline. 2022 also marks the first year since 2011 for affordability decline in year-on-year terms."

However, Knight Frank's data said, all markets except Mumbai, are recorded to be well below the threshold of comfortable affordability set at a 50% ratio, a level exceeding which banks rarely underwrite a mortgage.

According to the data, Ahmedabad emerged as the most affordable housing market in the country with an affordability ratio of 22% which implies that on average a household in Ahmedabad needs to spend 22% of its income to pay EMI for housing loans. Ahmedabad was followed by Kolkata and Pune at 25% each in 2022. Mumbai was the only city that recorded a higher-than-threshold affordability ratio at 53%, although it has improved the most since 2010.

"While affordability levels across cities are much better compared to 2010, they also stand significantly improved than those existing in pre-pandemic 2019. For instance, in NCR, the affordability index improved from 34% in 2019 to 29% in 2022, while for Bengaluru, it improved from 32% in 2019 to 27% in 2022," the report said.

Overall, the residential sales of these 8 cities were at 312,666 units reaching a nine-year high. It rose by 34% YoY.

While these top 8 markets made new launches to the tune of 328,129 units -- registering a growth of 41% YoY.

Shishir Baijal, Chairman and Managing Director, of Knight Frank India said, “The residential sector was an exceptional story of growth in 2022, as, despite numerous inflictions, the pace of growth remained largely intact. This momentum is the result of a definitive shift in attitude in favour of home ownership that has ignited the latent demand."

Baijal explained that the shift is so strong that despite some worsening in affordability on account of rising home loan interest rates, sales momentum has remained buoyant. Demand for homes has been further strengthened by continued economic growth, financial and income stability, and moderately growing prices.

Going forward, Baijal believes the pace of sales to remain unchanged in the new year, as most parameters are expected to remain favourable, including levels of inflation that are expected to start stabilising by mid of 2023.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.