Mumbai: Housing affordability in India has worsened over the past four years with Mumbai retaining the top slot as the least affordable city for home buyers, according to Reserve Bank of India (RBI) data released on Thursday.

The RBI’s quarterly Residential Asset Price Monitoring Survey showed the house price-to-income ratio in India increased in the last four years from 56.1 in the 2015 March quarter to 61.5 in the corresponding period of 2019. However, despite being the costliest city in India for home buyers, Mumbai’s affordability improved to 74.4 in the March quarter from 76.9 in the December quarter.

Bhubaneswar was the most affordable city for home buying with a price-to-income ratio of 54.3 in the March quarter compared to 47.2 in March 2015.

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The concept of price-to-income ratio is used by lenders to measure affordability of residential property, essentially as a measure of purchasing power for home buyers. “The key takeaway is that there is a wide gap between home prices in the country and real income. It has only worsened in the last four years. Therefore the number of years of income required to buy a property has only increased," said Anuj Puri, chairman, ANAROCK Property Consultants .

Significantly, due to slower growth in residential demand in the last four years, home prices have dropped or remained stagnant in major cities such as Mumbai and Delhi-NCR. According to a Knight Frank report, there has been a sustained drop in home prices in Mumbai, Pune, Chennai and Kolkata at 3%, 4%, 3% and 2%, respectively, from a year-ago period. However, sales volume remained steady at 4% in the first half of 2019. The report also pointed out that the growth in residential prices in the last four years in the top eight cities has been below retail inflation and “the gap has progressively increased since the first half of 2016."

According to the report, sales have been driven mainly by the affordable and middle income housing segment.

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