Ahmedabad is the most affordable housing market among eight major cities while Mumbai is unaffordable due to the high EMI to total income ratio, according to Knight Frank.

According to Knight Frank's Affordability Index 2021 report released on Wednesday, Indian markets are at their decadal best in terms of housing affordability. The decline in house prices and multi-decade low home loan interest rates have helped improve housing affordability in 2021, it added.

The affordability index indicates the proportion of income that a household requires, to fund the equated monthly installment (EMI) of a housing unit in a particular city. So, the index level of 40 percent for a city implies that on average, households in that city need to spend 40 percent of their income to fund the EMI of housing loan for that unit.

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An EMI to total income ratio of over 50 percent is considered unaffordable. Knight Frank said the affordability ratio in Delhi-NCR improved maximum, from 38 percent in 2020 to 28 percent in 2021.

"All markets, except Mumbai, are recorded to be well below the threshold of affordability set at 50 percent ratio," it said. Ahmedabad emerged as the most affordable housing market in the country with an affordability ratio of 20 percent followed by Pune at 24 percent in 2021.

Mumbai's affordability ratio stood at 53 percent. But, the city's affordability has improved the most since 2011. The affordability index of Hyderabad stood at 29 percent, and Bengaluru at 26 percent. Both Chennai and Kolkata scored 25 percent.

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The 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 underwrite home loans when the EMI to Income is under 50 percent.

(Edited by : Jomy Jos Pullokaran)

First Published:Dec 29, 2021 6:09 PM IST