According to the investors report published by HDFC Bank, the Indian real estate sector has witnessed an improved affordability. However, the price trends seem to be going north as opposed to what the report suggests. But being a major home loan lender in the market, HDFC Bank has undertaken an intensive research based on the customers who approach them for a home loan.
The bank has put forward ‘affordability’ as a relative term that is affected not only by the property prices but also by the annual income of the buyers. Affordability here is calculated by dividing the property prices by the annual income. This relative figure for the year 2015 is 4.4. The same was 4.7 in 2013 and 4.6 in 2014. The decrease in this relative affordability figure shows that real estate properties have become comparatively affordable this year. It was only in 2004 that the value was below 4.4 which makes it evident that it was not so affordable to buy real estate in the last ten years.
Regardless of what HDFC presents as a sensible calculation, real estate experts suggest that this method suffers a number of biases. The data has been collected from a sample consisting of the people who have approached the bank for home loan and have actually bought it. But this segment essentially consists of only those buyers who can actually afford a home since their income has been increasing in proportion to the rise in property prices. But what about the people who want to buy a home but do not earn enough to afford a property purchase?
This report by HDFC bank is way too optimistic and works on a forced belief that everything is going good with the Indian real estate industry, which is not the case really. The property market is suffering from acute shortage of homes in urban areas. Also, a huge stock of unsold inventory has plagued the market. If the affordability had actually improved, the scenario would have been a lot better.