Home prices near most affordable levels in over 30 years: HDFC

Home prices may have been on an upward spiral for many years, but the

RELATED ARTICLES

cost of owning a house in India remains near the most affordable level in over three decades, shows data compiled by mortgage giant HDFC Ltd.

The average price of a home, purchased with a housing loan, rose to over Rs 45 lakh in the 2012-13 fiscal -- marking the fourth consecutive year of uptrend from about Rs 25 lakh in the year 2008-09, HDFC has said in a presentation.

However, factors like an even greater surge in the personal income levels, tax incentives and lower interest rates, have resulted into houses becoming more affordable to purchase, it said.

As per an 'affordability' ratio compiled for over three decades by HDFC, the average cost of owning a house stood at 4.7 times of the annual income of the home buyer in 2012-13.

The affordability ratio, which takes into account the annual income of the home buyer along with the price of the house, stood at as high as 22 in the year 1994-95, but has been mostly on a declining trend since then.

This means that a home buyer, on an average, needed an amount equivalent to nearly 22 times his or her annual income in 1994-95, but an amount less than five times of the annual earnings is required for purchasing a house now.

HDFC has released this dataset as part of an investor presentation on its latest fiscal financial results.

Explaining the improved affordability in the housing market, HDFC said it has been possible because of rising disposable income, tax incentives (on interest and principal repayments) and affordable interest rates available to the home loan customers.

The lender further said that the mortgage market was also witnessing a high demand growth because of increasing urbanisation and favourable demographics of the country, where 60 per cent of population is below 30 years of age and there is a rapid rise in new households.

Interestingly, the affordability ratio has remained in the range of 4.5-4.7 for the five consecutive years now, although the home prices have nearly doubled in this period.

Excluding a temporary dip during 2008-09, the home prices in the country have been rising for 11 years now, after hitting the lowest level in two decades at below Rs 15 lakh in the year 2001-02. However, the average annual income of a home loan customer has almost tripled during this period from less than Rs four lakh to close to Rs 12 lakh currently.

To be precise, the affordability ratio of 4.7 during the the last fiscal 2012-13 is the fourth lowest ever figure, after after 4.3 in the year 2003-04, 4.5 in 2008-09 and 4.6 in 2011-12.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.
Image CAPTCHA
Copy the characters (respecting upper/lower case) from the image.

EDITORIAL OF THE DAY

  • India would have done well not to supress the 'Bofors interview'

    Bofors is one case that refuses to go away two-and-half decades after it grabbed public attention and became a byword for political corruption, claimi

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

TODAY'S COLUMNS

Varun Dutt

THE BLAME GAME

In decision-making, the fundamental attribution error (FAE), also known as ...

Zehra Naqvi

Dignity of labour is dignity of life

M Rafi Khan, a retired police IG, used to ...

Gautam Gupta

Retailers have it tough, thanks to e-commerce

For the past few months our focus has been on ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture