Mumbai: Home prices have touched record high levels but a faster rise in disposable income has made house purchasing the most affordable ever, housing loan major HDFC has said in a report.
According to latest data compiled by HDFC, the average property value of housing units have risen to an all-time high of over Rs.50 lakh this year, while the annual income of an average homebuyer has also grown to record levels of over Rs.12 lakh.
A sharper increase in income levels compared to housing prices has brought down the affordability ratio to 4.1, making this the lowest in India’s history and below the previous all-time low score of 4.3 posted in the year 2004. The ratio stood at 4.4 in 2015.
A lower ratio indicates that house purchase has become more affordable now.
The report said improved affordability has largely been driven by rising disposable income and affordable interest rates on home loans.
The affordability ratio stood at a high of 22 in 1995, signifying that an average home buyer needed to pay 22 times of his/her annual income to purchase a house.
HDFC said its average home loan size has also grown to Rs.25 lakh, from Rs.23.3 lakh last year.
It also said that mortgage penetration is the lowest in India at just 9 percent of the GDP, which implies significant room for growth.
Globally, the penetration level is highest in Denmark at 114 percent while in Britain, it is 75 percent and in the US, 68 percent.