Home Prices Near Most Affordable Levels In Over 30 Yrs

Bangalore: Home prices have been increasing since many years and the prices have touched the sky but the cost of buying a house in India remains close to affordable level in over three decades, according to a data collected by HDFC. HDFC has compiled this data as part of an investor presentation on its latest fiscal financial results.

In 2012-13 fiscal, the average cost of buying a house with a home loan increased to over 45 lakh, marking the fourth consecutive year of uptrend from 25 lakh back in 2008-09, as per HDFC.

However, factors like a surge in the personal income levels, lesser interest rates and tax incentives, which have resulted into housing more affordable to buy in India over decades.

According to HDFC’s data on 'affordability' ratio that has been collected for over three decades, the average cost of purchasing 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.

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.

According to HDFC, the mortgage market was also observing a soaring demand because of rising urbanisation and favourable demographics of India, where 60 percent of population is below 30 years and there is a rapid rise in new households.

The housing prices in the country have been increasing for 11 years now excluding the time of economic depression during 2008-09. However, the average annual income of a home loan borrower has almost tripled during this period from less than 4lakh to close to 12 lakh currently.

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

(With PTI inputs)