The economy of India is a developing mixed economy and it is one of the biggest economy in the world. Since 2014, India has emerged as the fastest growing major economy in the world, surpassing China.
The role of the real estate sector in the Indian economic growth is very important and it is expected to be more important in the future. In 2017, the real estate sector contributed about 6% – 7% to India’s GDP. According to the Indian Real Estate and Construction, the Indian real estate sector is expected to contribute 13 percent to the country’s gross domestic product (GDP) by 2025 and to touch $1 trillion by 2030, becoming the third largest globally. It is also expected that this sector will incur more non-resident Indian (NRI) investments in both the short term and the long term.
Buying a home in India is complicated, as in most of the countries, and it needs a lot of energy to find the best house for yourself and your family, or for investments purpose. Making an optimal choice is never simple. Before buying a house, it is necessary to analysis the real estate market, doing financial planning and determining the risk profile. In this work, we are going to analyse the real estate market and finding the 33 most affordable Indian cities to buy a home.
If we consider the price to income ratio, the less expensive city is Gurgaon, where are necessary 7 years to buy an apartment. Noida is in the second place with 7.02 years, followed by Vadodara with 7.1 years, Bhubaneswar with 7.6 years and Mangalore with 7.9 years.
If we consider price to rent ratio of the city centre, the real estate market is overvalued in all the cities analysed in this work, so rening an apartment is better than buying.
If we consider price to rent ratio outside the city centre, the real estate market is undervalued in Ahmedabad, so in this city buying an apartment is better than renting. In Raipur is better to rent, but not always, because under certain circumstances buying is better. In Bangalore, Goa, Indore, Kochi, Surat, Lucknow (Lakhnau), Mangalore, Hyderabad, Bhubaneswar, Noida, Chennai, Vadodara, Pune, Kolkata, Gurgaon, Mysore, Visakhapatnam, Delhi, Jaipur, Vijayawada, Coimbatore, Chandigarh, Bhopal, Nagpur, Thiruvananthapuram, Navi Mumbai, Patna, Guwahati, Thane, Mumbai and Ernakulam the real estate market is overvalued, so in these cities renting an apartment is better than buying.
If we consider the mortgage as percentage of income, the less expensive city is Noida, where the mortgage payment is about 76.4% of the incomes. Gurgaon is in the second place with 77.1%, followed by Vadodara with 77.9%, Mangalore with 82.2% and Bhubaneswar with 86.2%. The most expensive cities are Thane with 175.7%, Ernakulam with 300.5% and Mumbai with 468.5%.
Lastly, it is recalled that there could be many occasions to buy an apartment at discount price when the real estate market is overvalued and not only when it is overvalued. In addition, that could be many expensive apartments despite the real estate market is undervalued.
About the data used in this work
Real estate market analysis is made considering an apartment of 90 square meters which price per square meter is the average of price in the city centre and outside of city centre. The indicators used are:
- Price to income ratio. It is calculated by dividing apartment price to median familial disposable income for a year. Lower value is better.
- Price to rent ratio. It is calculated by dividing the apartment price to the received rent income or the estimated rent that would be paid if renting. Lower values suggest that it is better to buy rather than rent, and higher values suggest that it is better to rent rather than buy.
- Mortgage as percentage of income. It is calculated by dividing the monthly cost of the mortgage to take-home family income. Lower value is better.
The data used in this work are provided by Numbeo and are relating to mid-2019.