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