A quarterly survey by the Reserve Bank of India (RBI) on Thursday revealed that housing affordability in India has deteriorated in the last four years with Mumbai being the costliest city in India. This is on the account of an increase in the house price to income (HPTI) ratio from 56.1 in March 2015 to 61.5 in March 2019, according to RBI's Quarterly Residential Asset Price Monitoring Survey (RAPMS).
This survey was conducted on housing loans doled out by select banks/housing finance companies (HFCs) across 13 cities. The RBI has been conducting this study since July 2010. "Housing affordability worsened over the past 4 years as the house price-to-income (HPTI) ratio increased from 56.1 in March 2015 to 61.5 in March 2019," the survey said.
This means Indians now have to shell out a bigger portion of their earnings to buy a home than in 2015. Where Mumbai with a HPTI of 74.4 continues to be the least affordable city in India, Bhubaneswar with a HPTI of 54.3 is the most affordable city, the RBI said. The HPTI ratio shows affordability. However, despite being the most expensive city in India for homebuyers, Mumbai's affordability has improved to 74.7 HPTI in the March quarter compared to 76.9 in the December quarter.
The report also showed that banks are becoming more risk-tolerant while granting housing loans and are ready to offer higher loans against the value, the RBI survey discloses. "The median loan-to-value (LTV) ratio moved from 67.7 to 69.6 between March 2015 and March 2019, showing that banks have become increasingly risk-tolerant," the survey added.
The HFCs were flexible to take more risk as they were willing to offer an LTV ration of 72. HFCs for the most part of March were ready to give an LTV of 75. Mumbai, Pune and Ahmedabad logged larger share of EMI-to-income ratio even as median EMI-to-income ratio comparatively has continued to be stable because these three cities are also the most expensive for buying a house. The price-to-income ratio is basically used to assess the purchasing power for homebuyers.
"The key takeaway is that there is a wide gap between home prices in the country and real income. It has only worsened in the last four years. Therefore, the number of years of income required to buy a property has only increased," Anuj Puri, Chairman, ANAROCK Property Consultants told the Livemint.
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