'Kolkata ranks 2nd in list of most affordable cities in India'

KOLKATA: Kolkata has witnessed stability in affordability levels and has ranked as the second most affordable cities in India.

From 45 per cent in 2010, the home purchase affordability index improved to 32 per cent in 2019. With the advent of the pandemic in early 2020, the affordability index further improved to 25 per cent in 2021 and remained stable at 25 per cent in 2022.

In its annual proprietary study, the Affordability Index 2022, Knight Frank notes that home buying affordability levels in Indian markets have declined in 2022 compared to 2021. The 225 BPS cumulative increase in repo rate in 2022 and the consequent increase in home-loan rates, along with an increase in residential prices caused the decline in affordability. However, while affordability levels in 2022 have worsened compared to 2021, they remain significantly better than the pre-pandemic levels in 2019.All markets, except Mumbai, have recorded to be well below the threshold of comfortable affordability set at 50 per cent ratio. Ahmedabad emerged as the most affordable housing market in the country with an affordability ratio of 22 per cent followed by Kolkata and Pune at 25 per cent each in 2022. Mumbai was the only one that recorded a higher-than-threshold affordability ratio at 53 per cent. Affordability levels in Mumbai improved the most since 2011.

Affordability levels had improved even during the pandemic-impacted years of 2020 and 2021 as residential price growth was subdued and the government aggressively cut policy rates to increase liquidity in the highly stressed economic environment.

The Knight Frank Affordability index captures movement in key constituents like property prices, home loan interest rate and average household income to determine the buyers' ability to purchase a house.

Banks generally underwrite home loans when the EMI to Income ratio is under 50 per cent and this is deemed to be the threshold for affordability by the Affordability Index. On that account, existing income and average ticket-size metrics across seven out of eight markets make it possible for a homebuyer to easily finance their home purchase.