Is Buying a House in Your City Affordable?
Dear Friends and #Real estate Enthusiasts,
Welcome to another edition of #Real Estate newsletter, we dive deep into a topic that concerns all of us: the affordability of buying a house in our beloved cities. As the real estate market continues to evolve, it's crucial to understand the current scenario and make informed decisions about one of life's most significant investments.
First, let’s dive into the reasons for the surge in real estate sales.
Registration Surge:
Over 4,800 properties were registered in Mumbai's real estate market in the first 10 days of November, constituting over 40% of the average monthly registrations
Diwali Impact:
The surge is attributed to Diwali, considered an auspicious time for property purchases. However, despite robust registrations, developers note a slower pace in closing deals compared to the previous year, with homebuyers taking more time to decide due to increased options.
Sales Dynamics:
Developers report increased sales, with a notable uptick in demand for super luxury and luxury categories. While sales have doubled, deal closures seem slightly prolonged due to heightened competition and multiple launches.
Q3 2023 Real Estate Trends:
The first nine months of 2023 saw record residential sales in the top 7 cities, with Mumbai leading in Q3 sales. The premium segment (above Rs. 1.5 CR) had the highest contribution to quarterly sales, showcasing a trend of buyers opting for larger homes.
NRI Investment:
The NRI contribution to the Indian real estate market is on the rise, reaching 15%, and is expected to hit 20% by 2025. Bangalore and Mumbai are top choices for NRI buyers, with a growing focus on premium and luxury options.
Challenges for NRIs:
Lack of information and transparency remains a significant concern for NRI buyers, emphasizing the need for improved accessibility and clarity in the property purchase process. Property management services are increasingly sought after by NRI property owners.
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This comprehensive snapshot reflects the dynamic nature of Mumbai's real estate market, showcasing trends, challenges, and the evolving preferences of buyers in the current landscape. As NRIs and premium segments are getting highlighted, builders prefer to make more for this segment.
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Income vs. Price race:
Now let’s measure the House price to income ratio: House Price / Net Annual Family Income, now this ratio should not be over 5 years. For example, if a family income is 10L and the house price is 1CR, then it comes to 10Yrs. This is not recommended if you want to have a balanced life. Now a survey conducted per year says the median price is taken for income, and price of the area. The charts above show that Mumbai records the highest spend-in-income ratio. That means Mumbai homes are pricier hence the residents have to pay more to get the desired house. The HDFC chart below shows customers who have taken more than 75% of loans, clearly, Mumbai tops the list.
Conclusion:
As we see that more and more people have to buy more than 50% of their annual family income, the affordability in the city decreases. Globally too life in many metropolitan cities has become unaffordable. This calls for Generation Z to be more educated and earn high incomes to manage a balanced life.
Stay positive, stay motivated, and keep learning new things for a brighter future.
Warm regards,