- Kolkata overtakes Hyderabad; to become the most affordable market in 2020 - Affordability expected to either remain at similar levels or increase in 2021 - Mumbai moves closer to affordability threshold; likely to breach it in 2021 MUMBAI, India, Oct. 29, 2020 /PRNewswire/ -- JLL announced the launch of its annual Home Purchase Affordability Index (JLL HPAI) today which shows that from 2011 to 2020, home purchase affordability improved across key Indian cities which were part of the Index. This was despite a bigger fall in annual household income as compared to residential property prices. A sharp decrease in the cost of funding (average home loan rates reduced from ~8.9% in 2019 to 7.5% in 2020), more than offset the adverse impact of lower incomes on affordability, the report added.
'We believe that the initial signs of revival were visible in the residential market in the third quarter of 2020, with sales of residential units witnessing an uptick. Furthermore, our analysis suggests that despite a fall in household income in 2020, home purchase affordability has increased in 2020 across all the markets under consideration,' said Ramesh Nair, CEO and Country Head, JLL India. 'Interestingly, in 2021, we're expecting home purchase affordability to either remain at similar levels or improve. But the broader recovery of the residential market and the likely pace of translation of demand into actual sales volumes will be dependent largely upon the economic environment and the prevailing consumer sentiments,' he added.
Until 2019, JLL HPAI indicated that Hyderabad was the most affordable residential market. In 2020, Kolkata overtook Hyderabad to become the best market in terms of home purchase affordability. Mumbai continued to be the only market below the affordability threshold of 100. However, the report points out that Mumbai is the fastest moving city, showing a significant improvement on JLL HPAI from 47 in 2011 to 95 in 2020.
'The future of the residential market and the sustenance of the recovery process depends on the containment of the virus. 2021 can pan out in two different ways. If the virus is contained by Q1 2021 and economic activity resumes at full capacity, affordability is expected to improve across all the cities under consideration. In fact, in this scenario Mumbai is expected to breach the affordability threshold. If the virus outbreak is not contained in the first quarter of 2021 and economic activity remains subdued, affordability levels are likely to remain at similar levels in most cities,' said Samantak Das, Chief Economist and Head of Research & REIS India, JLL.
JLL HPAI signifies whether a household earning an average annual income (at an overall city level) is eligible for a housing loan to buy a 1,000 sq ft residential property in the city, at the prevailing market price and home loan interest rate. It analyses the interplay between three pivotal factors - property prices, income and home loan rates to determine the current and the emerging trends in the home purchase ability of urban households. The index covers the top seven markets in India - Mumbai, Delhi NCR, Bengaluru, Chennai, Pune, Hyderabad and Kolkata.
Residential market turns the corner with sales up 34% in Q3 vs Q2 2020 Q3 2020 sales increased by 34% versus Q2 2020. Mumbai accounted for 29% of the total sales in the quarter, while 22% of sales was contributed by Delhi NCR. Growth in sales activity was also driven by stronger demand in Chennai, Hyderabad and Pune. Prices remained largely stable across all the seven markets when compared to the previous quarter. It is important to note that developers in certain markets are providing moderate price discounts and flexible payment schemed to kickstart sales, thereby facilitating cash flows to tide over the crisis in the short term. These could be the first signs of a broader recovery of the residential market in the country.
Increased affordability has not been enough to drive fence sitters to effect purchases. Affordability is necessary when determining home purchases, but not enough to drive sales. A homebuyer considers the prevailing economic condition, employment scenario and future income flows. With the current muted consumer sentiment and uncertainty around job security, what is required is policies directed towards improving the overall economic outlook.
About JLL JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of nearly 93,000 as of June 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
In India, JLL has an extensive presence across 10 major cities (Mumbai, Delhi NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata, Ahmedabad, Kochi and Coimbatore) and over 130 tier II & III markets with a cumulative strength of close to 12,000 professionals. Headquartered out of Mumbai, we are India's premier and largest professional services firm specializing in real estate. Our services cover various asset classes such as commercial, residential, industrial, retail, warehouse and logistics, hospitality, healthcare, senior living, data centre and education. For further information, please visit www.jll.co.in.