Housing affordability worsened over past four years, finds RBI survey

Banks are getting more risk-tolerant in housing loans and are willing to offer higher loans against the value, reveals a survey by the RBI.

“The median loan-to-value (LTV) ratio moved from 67.7 to 69.6 between March 2015 and March 2019, showing that banks have become increasingly risk-tolerant,” the Residential Asset Price Monitoring Survey showed. 

By March-end, housing finance companies (HFCs) were willing to take more risk as they were ready to offer an LTV ratio of 72. For the most part of March, HFCs were willing to offer an LTV of 75.

Even as median EMI-to-income ratio has remained relatively steady, Mumbai, Pune and Ahmedabad recorded higher share of EMI-to-income ratio. This is because these three cities are also the costliest in terms of buying a house.

With a median 74.4 months’ salary required to buy a house, Mumbai remains the least affordable city in India, while Bhubaneswar was the most affordable, with the median house price-to-monthly income (HPTI) ratio of 54.3.

The housing affordability worsened over the past four years, as the HPTI ratio increased from 56.1 in March 2015 to 61.5 in March 2019 generally for cities in India. “The movement of median loan-to-income ratio also confirms worsening housing affordability as it moved from 3 in March 2015 to 3.4 in March 2019,” the study showed.