Rising interest rates have hit home affordability in India's top cities, with Mumbai being the costliest and Ahmedabad the cheapest.
Residential properties became less affordable in all eight major cities during the first six months of this year, according to Knight Frank India's 'Affordability Index' that tracks the equated monthly instalment or EMI-to-income ratio for an average household.
The central bank has raised the repo rate by 250 basis points since April 2022 to contain inflation. This has impacted affordability by an average of 2.5% across cities and increased the EMI load by 14.4%, the property consultant said.
Ahmedabad is the most affordable housing market among the top eight cities, with an average household paying 23% of its income as EMI. In Delhi-NCR, the EMI-to-income ratio is 30%, while Mumbaikars on an average pay more than half of their income in EMI.
The ratio over 50% is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage, Knight Frank said.
The affordability had improved from 2010 to 2021 across the eight cities, especially during the pandemic when the RBI cut repo rates to decadal lows.
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