Buying your own home is more affordable now than it has ever been in the last four years. The average price of a house is around 4.5 times of the buyers average income, against 4.6 times in 2005.
In 2007, the affordability factor had widened to 5.1% due to a sharp increase in real estate prices. However, with the prices of new houses dropping by around 30%, the number of years’ income required to buy a house has come down to 4.5 years.
Developers have realized the need to introduce affordable housing and are reducing dwelling size and omitting amenities which drive up cost in a bid to cater to the untapped demand.
HDFC, India’s largest housing finance company, calculates the ‘‘affordability factor’’ based on data of its home loan borrowers. At 4.5 times of annual income, the average EMI would be about 50% of a house buyer’s income on a 15-year loan. In the home loan market, this is considered affordable.
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