Right time to buy a flat! Houses in India cheaper now than in 2010
Houses in Indian towns are far more affordable today as compared to 2010, particularly in Mumbai, Pune and Bengaluru, making it the perfect time for fence sitters to take the dip.
While buyers in Mumbai needed to shell out 11 times their annual income to buy a house in the megalopolis at 2010, the figure is now down to just 7.2 times their annual earnings, making homes cheaper than they were eight to eight years ago, according to Knight Frank Research’s affordability matrix.
The matrix measures the number of times a household’s annual income it has to shell out to buy a house.
Decreacing sizes and prices
This growth in affordability has been led by a couple of factors. Contracting demand due to skyrocketing costs led to a sluggish period of reduced residential sales until 2017 and developers were forced to reduce costs in the aftermath of rising unsold inventory.
“Developers have adjusted prices as a result of slow sales over the previous two-three years. We will see more stress for programmers for a few more quarters and people might find them bringing down costs further.
Another factor contributing to growing affordability is that the diminishing size of flats. The typical apartment dimensions shrank by 26 per cent throughout 2014-2018, in accordance with Knight Frank. So, in 2014, in case a 2BHK apartment had a area of 1000 sq feet, it will now be 740 sq ft.
“This reduction in sizes has made houses cheaper,” he added.
Besides this, mortgage financing rates have come down and the authorities has announced incentives for buyers, including tax cuts and subsidies for affordable housing segment. Underneath the PM Awas Yojna (PMAY), families with an yearly income of around Rs 18 lakh could avail Rs 2.3 lakh upfront subsidy for a home. Buyers can also be qualified for income tax exemption on home loans.
Yet, the sales have been almost stagnant for the previous three decades. “Consumers have a tendency to await additional cost reduction in such a scenario. If markets sentiments remain this manner, then additional correction is the sole means to bring in people,” Zia said.
Despite the enhanced affordability and incentives for buyers, home ownership remains out of reach for most aspiring buyers, and that makes metros a large chance for rental housing. With the authorities working on bringing in Model Tenancy Act (MTA), the rental home is set to get a boost in India.
Sudip Mullick, Partner, Khaitan & Co, said limited coverage regarding rental housing and current legislations being conscientious to landlords are a significant hindrance for production of rental housing stock in the country.
“The MTA offers a much-needed independent mechanism specially designed to handle issues pertaining to leasing premises. MTA provides for speedy treatments to both owner and tenant. It will allow the court to deal with greater legal things, which require evaluation of different issues arising from changing environment of complex commercial transactions, government policies and new laws,” he further added.
India has almost 11.09 million metropolitan unoccupied housing units of which 10 countries and Union Territories donate 78 per cent (8.64 million) to complete vacancy levels.
According to joint research by Knight Frank and Khaitan & Co, the MTA is going to be more instrumental in institutionalising rental home, which is largely unorganised at India.
“If leasing property is institutionalised with the debut of a legal framework , it will help in creating large purpose-built rental stock, which may also bring institutional investments in the very long run,” the analysis stated.