The Indian real estate market continues its upward trajectory, marked by increased demand and soaring property prices. According to Magicbricks’ latest report, “Housing Affordability in Major Indian Cities,” the growing disparity between household income and property prices has impacted affordability across the nation.
Affordability Trends
The report highlights a significant shift in housing affordability. Between 2020 and 2024, household incomes across India’s top 10 cities grew at a compound annual growth rate (CAGR) of 5.4%, while property prices surged at a CAGR of 9.3%. As a result, the Property Price to Annual Household Income Ratio (P/I Ratio) has risen from 6.6 in 2020 to 7.5 in 2024, surpassing the globally accepted benchmark of 5.
Based on the P/I Ratio, Chennai, Ahmedabad, and Kolkata are identified as the most affordable cities for residential investments in 2024, each with a ratio of 5. In contrast, the Mumbai Metropolitan Region (MMR) and Delhi are the least affordable, with ratios of 14.3 and 10.1, respectively.
Rising EMI Burden
The report also reveals a growing burden on home buyers, with the EMI-to-monthly income ratio increasing from 46% in 2020 to 61% in 2024. This trend indicates mounting affordability concerns, particularly in major metros. The ratio is notably high in MMR (116%), New Delhi (82%), Gurugram (61%), and Hyderabad (61%). Conversely, cities like Ahmedabad (41%), Chennai (41%), and Kolkata (47%) remain relatively more affordable.
Market Outlook
Magicbricks CEO Sudhir Pai noted that residential investments were most affordable between late 2021 and 2022 due to low interest rates and recovering incomes. However, increased demand and rising prices have since challenged affordability. The report predicts a potential equilibrium in the market, with a slowdown in price growth expected due to anticipated increases in residential supply.
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Investment Insights
The price-to-annual income ratio provides insights into housing affordability across cities. Ratios below 5 indicate affordability, while ratios above 8 suggest high unaffordability. The current data underscores the varying degrees of affordability in different Indian cities, with Chennai, Ahmedabad, and Kolkata emerging as favorable investment destinations amidst rising costs nationwide.
