According to a recent report, Mumbai has claimed the distinction of being the most costly housing market in the country, as determined by the ratio of Equated Monthly Installments (EMIs) to income.
Mumbai, often referred to as India's financial capital, has secured the title of the nation's most expensive city to reside in, according to a recently published report by the well-known real estate consultancy firm, Knight Frank India.
The report reveals that Mumbai has clinched the position of having the highest-priced housing market in the country, based on an affordability index that gauges the affordability of living based on the proportion of Equated Monthly Installments (EMIs) for housing loans to the total income of an average household in a specific city.
To illustrate, a city with an Affordability Index of 40 percent signifies that, on average, households in that city need to earmark 40 percent of their income to meet the EMI obligations for a home loan.
The report underlines that Mumbai's EMI-to-income ratio has reached 55 percent, signifying that an average household must allocate over half of its earnings to cover the EMIs for a housing loan, making it financially challenging. It's worth noting that an EMI-to-Income ratio surpassing 50 percent is typically deemed unaffordable, as this crosses the threshold where banks generally hesitate to approve mortgages.
The report continues to emphasize that Hyderabad is the second most costly city with an EMI-to-income ratio of 31 percent, trailed by Delhi-NCR, which has a ratio of 30 percent.
Bengaluru in Karnataka and Chennai in Tamil Nadu jointly occupy the fourth position with an EMI-to-income ratio of 28 percent. Not far behind, Pune in Maharashtra and Kolkata in West Bengal both necessitate an average of 26 percent of household income to meet home loan EMIs.
The report also brings to light that Ahmedabad in Gujarat has emerged as the most affordable urban center to live in India, with an average household needing to allocate a mere 23 percent of its income to accommodate home loan EMIs.
The index assumes a loan term of 20 years, an 80 percent loan-to-value ratio, and a standardized house size across all cities.
Over the past year, the cost of living has surged across these cities. The EMI-to-income ratios have seen an increase of approximately 1-2 percentage points, largely attributed to the Reserve Bank of India's decision to elevate its key lending rate by 250 basis points since the previous year.
As a result of this move, the report notes an average 14.4 percent uptick in the burden of EMIs across the cities.
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