Buying a house in a city like Mumbai or Delhi is becoming a very costly affair. While one can argue that income levels have gone up accordingly, the fact still remains that rising interest rates have taken a toll on the buyers EMI and the developers cost of construction making real estate costly.
But the global financial crisis of 2008 affected the Indian housing story. Corporate earnings were affected and many saw their jobs being threatened. Again, on the domestic side inflation became a big problem to manage and interest rates started to go up. This affected the ability of the home buyer to pay higher EMI and on the other side the construction cost went up by almost 40%. Again we were back into the gloomy days of unaffordable housing prices and low salary growth. Real estate consultants are abuzz with data about unsold housing stock that has kept on increasing in Delhi and Mumbai and if interest rates don’t come down the investors in these housing units will be in trouble.
Interestingly, the average income of a house buyer has crossed Rs 10 lakh as compared to Rs 2 lakh a decade ago so with a five times increase in salary, housing prices have kept in tune with this ratio. Over the last decade real estate prices have also gone up by five times.
Even if these numbers are satisfactory, there are a lot of questions that remain unanswered when it comes to affordable housing.
Pranay Vakil, Chairman of Knight Frank, a real estate consulting company answers some of the issues that ail affordable housing. Do listen to him.