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 4 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 4.3 in the year 2003-04, 4.5 in 2008-09 and 4.6 in 2011-12.