Homes most affordable in 30 yrs despite price hike: HDFC | india | Hindustan Times
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Homes most affordable in 30 yrs despite price hike: HDFC

Real estate prices may have hit the rooftop, thanks to high interest rates, but home prices are near their most affordable levels in over three decades, data compiled by mortgage giant HDFC Ltd show.

india Updated: May 20, 2012 20:45 IST

Real estate prices may have hit the rooftop, thanks to high interest rates, but home prices are near their most affordable levels in over three decades, data compiled by mortgage giant HDFC Ltd show.

Though home prices have been rising for more than 10 years, except for a temporary slump in 2009, the “affordability” of purchasing a house has been mostly declining for almost two decades now, according to the data.

The affordability ratio, which takes into account the annual income of the home buyer along with the price of the house, declined to 4.6 in the fiscal year ended March 31, 2012, from as high as 22 in 1995.

This means that a home buyer, on an average, needed an amount equivalent to nearly 22 times his or her annual income in 1995, but now an amount less than five times of the annual earning was required for purchasing a house.

The data compiled by HDFC showed that the affordability ratio of 4.6 in the last fiscal year was the third-lowest ever, after 4.3 in the year 2004 and 4.5 in 2009.

“The reason why houses are still affordable, despite a steady rise in property prices over the years, is that income levels have also risen during the period along with added tax benefits on housing loans,” said Renu Sud, managing director, HDFC. “Today it takes about 4.6 years’ income to buy a house. As long as that ratio stays in the range of 4.2-5.5, housing loan demand will be there.”