The Indian real estate market is currently experiencing a bull run, marked by soaring prices and escalating demand. At the same time, household incomes across the top 10 cities increased at a CAGR of 5.4%, while property prices surged at a CAGR of 9.3% (between 2020-2024). This growing gap in income and property price growth rates has weakened affordability.
Elaborating on the same, Magicbricks’ flagship report “Housing Affordability in Major Indian Cities” revealed that the Property Price to Annual Household Income Ratio (P/I Ratio) in India has increased from 6.6 in 2020 to 7.5 in 2024 (higher than the globally accepted benchmarks of 5). Based on the P/I Ratio, the report observed that Chennai (5), Ahmedabad (5), and Kolkata (5) are among the most affordable cities for residential investments in 2024, while the Mumbai Metropolitan Region (14.3) and Delhi (10.1) emerged as the least affordable.
Explaining the trends, Sudhir Pai, CEO, Magicbricks shared “Between the latter half of 2021 and 2022, residential investments were at their most affordable. During this period, the market was experiencing a resurgence, characterized by low interest rates, recovering household incomes, and modest increase in residential prices. However, homeownership sentiment has since peaked, resulting in demand significantly outpacing available supply, leading to a rapid and substantial surge in residential prices, presenting new challenges for affordable housing.”
Furthermore, the report revealed that the EMI-to-monthly income ratio in India has risen from 46% in 2020 to 61% in 2024, indicating a growing burden of EMIs on home buyers and reflecting affordability concerns nationwide, especially metros. The trend is more pronounced in MMR (116%), New Delhi (82%), Gurugram (61%) and Hyderabad (61%). In contrast, cities like Ahmedabad (41%), Chennai (41%) and Kolkata (47%) are relatively more affordable.
- Price to Income Ratio = Property Price*1/ Household Annual Income*2
- Affordability indicates the proportion of property price to annual household income. So, if the affordability of a city is 3.7, this means the average property price in the city is 3.7 times the average annual household income.
Conclusion
The report by Magicbricks highlights the growing challenges in India’s real estate market. With residential prices outpacing income growth between 2020 and 2024, the Property Price to Annual Household Income Ratio has risen, making housing less affordable, especially in metros like Mumbai and Delhi. However, cities like Chennai, Ahmedabad, and Kolkata stand out as the most affordable metros for residential investments. The report anticipates that the market will reach an equilibrium as price growth decelerates due to increased residential supply, providing hope for improved affordability.
Graph Info source-magicbricks.com