JLL's Home Purchase Affordability Index analyses affordability across India's key cities

JLL, India's premier and largest professional services firm specializing in real estate launched its annual Home Purchase Affordability Index (JLL HPAI) today. The Index signifies whether a household earning an average annual income (at an overall city level) is eligible for a housing loan to buy a 1,000 sq ft residential property in the city, at the prevailing market price and home loan interest rate. It is pertinent to note that a reduction in house size may bring in affordability, without decrease in per sq ft pricing. However, this reduction in the size of the apartment may be a compromise on the buyer's side. Hence, it has factored in the saleable area of the house as 1,000 sq ft for a four-member household.

JLL HPAI analyses affordability across India's key seven cities (Mumbai, Delhi NCR, Bengaluru, Chennai, Pune, Hyderabad and Kolkata) for the period 2011 to 2018 and factors in home loan interest rates, average household income and price of a 1,000 sq ft apartment. It is interesting to note that only Hyderabad out of the seven cities covered as a part of our study was affordable in 2013 whereas the situation flipped positively by 2018. In 2018, all the cities except Mumbai crossed the affordability threshold as per JLL HPAI.

JLL HPAI indicates improved affordability across cities

Mumbai Delhi NCR Bengaluru Chennai Pune Hyderabad Kolkata

2011 - 47 83 113 93 101 140 104

2013 - 43 65 90 90 90 111 87

2018 - 84 120 154 155 167 183 174

JLL HPAI of 100 means that a household has exactly enough income to qualify for a home loan. A score of less than 100 means that a household does not have enough to qualify for the home loan. A score higher than 100 implies that the household has more than enough income to qualify for the home loan. Going ahead, like the national trend, the affordability levels will continue to improve in Mumbai at end of 2021.

JLL HPAI scores to further improve in future

Mumbai Delhi NCR Bengaluru Chennai Pune Hyderabad Kolkata

2019 - 90 125 158 164 177 187 185

2020 - 92 125 159 166 182 188 189

2021 - 94 126 160 167 185 189 193

Ramesh Nair, CEO & Country Head, JLL India says, "In our pursuit to advancing the residential sector to its next level, it is important to understand concepts such as home buyer's affordability which is influenced by various elements. With JLL HPAI, we aim to share a holistic perspective which can act as a feeder into strategic decision making for developers and policy makers."

He added, "Favorable home loan rates backed by stable price have resulted in improved affordability across cities from 2014. JLL HPAIscore of Mumbai has doubled in the last seven years, implying significant increase in in the city. From this point onwards, residential real estate is bound to grow further as we will continue to see robustness in deliveries and offtake in sales."

Samantak Das, Chief Economist and Head of Research & REIS, JLL India says, "As per JLL HPAI, affordability levels will continue to improve over the next three years for all seven cities. Over the same period, we expect a steady increase of 3-5% in property rates and 8-9% increase in average annual household income and home loan interest rates to remain range-bound. As developers align themselves with demand, in terms of quality of products as well as financial viability, sales momentum is likely to pick-up in the next 2-3 years."