Will home buying affordability rise to a three-year high in 2024? Here's what experts say

In the ever-changing landscape of real estate, the potential for acquiring a home may reach a better level, compared with the last three years, by 2024. Looking at market dynamics, price, affordability, and economic indicators, analysts say the prospect of homeownership appears increasingly within reach for many in the coming year. Let us further explore experts' perspectives and views on whether the affordability of buying a home will rise to a three-year high in 2024.

Kamaljeet Rastogi, CEO, SahiBnk, which is powered by Manipal Business Solutions, is of the opinion that even though the repo rate has remained steady, yet market might still change. “The repo rate hasn’t gone down since May 2022, going up by a total of 250 basis points since the start of the COVID-19 pandemic. However, since February 2023, it’s been steady at 6.50 per cent. Even though things seem stable lately, there’s a crucial point where the market might change in uncertain ways. Over the last decade, the average repo rate hovered just above 6 per cent, suggesting a threshold where drastic changes may be unlikely given current market conditions. Although affordability is at a 3-year high, the post-COVID recovery witnessed a reduction to a mere 4% repo rate. Amid a bullish real estate market, escalating property rates eclipse the impact of repo rate fluctuations, posing a perennial threat to affordability," he said.

Analysts suggest that if the inflation rate falls within the lower range of the RBI’s target, it will likely lead to a reduction in the repo rate in the coming year.

“With the current economic conditions favouring improved income growth, we anticipate that affordability in 2024 will be better than previous years as compared to the peak affordability levels observed in 2021. Though continuous interest rate hikes by the banks will increase in the EMIs paid by the customers, which is expected to be countered by the unchanged repo rate movement and relatively stronger growth in household incomes,” said Rahul Mehrotra, Managing Director and Chief Executive Officer at Religare Housing Development Finance Corporation.

“The outlook for home affordability in 2024 appears promising, with factors such as a potential reduction in the repo rate driving positive changes in the housing market. Despite the challenges posed by escalating housing prices and mortgage rates in the past two years across major Indian cities, the upcoming year holds prospects for improved affordability,” said Pramod Kathuria, Founder and CEO of Easiloan.

A city-wise breakdown reveals varying trends. Mumbai is expected to experience a dip in its affordability index, while Kolkata may see a marginal improvement. Despite sustained price hikes in 2023, the overall dip in affordability is relatively minor, attributed to enhanced economic prospects and income growth compared to the preceding year.

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“Looking forward, a positive shift is anticipated in 2024. The expectation of a 60-80 basis points reduction in the repo rate suggests a favourable lending environment. This, coupled with potential macroeconomic factors and a focus on interest rate reduction, could mark a renaissance in the housing market, with affordability levels on an upward trajectory,” added Kathuria.

In essence, the evolving dynamics in the Indian housing market, as outlined in this analysis, point towards a potential improvement in home affordability in the coming year, supported by insightful trends, historical context, and expectations for 2024.