In urban India, owning a home in one of the metropolitan cities is much more than financial success; it is the symbol of social stability and economic advancement for the middle class.  However, urbanization has brought with it a huge disparity between salary growth rate and housing prices. As such for majority of middle-class people working in these cities, buying a home there is becoming a harder task than ever before.

Mukesh Kumar, Founder & Director, M-Sanvi Real Estate

The discrepancy between salaries and property prices becomes more prominent due to various reasons. Currently, prices of properties in Mumbai, Delhi NCR, Bengaluru and other big cities are increasing by 8-12 percent annually whereas average middle-class incomes are rising by 5-7 percent annually. Based on the housing affordability indexes, a family living in Mumbai would require 10-12 times more income than the cost of an average home By global standards, one normally requires 3-5 times more income to buy a home. An average 2 BHK house in urban India is worth between ₹60 lakh and ₹1.5 crore while middle-class salaries are usually estimated between ₹6 and ₹12 lakh. This leads to the situation when many potential buyers can neither afford houses located in preferred areas nor purchase bigger premises.

 Most middle-class Indian families have no option but to finance   their property purchase. Moreover, rising prices only increase loan amounts and prolong repaying terms. About 75-80% of urban property owners avail housing loans to buy property. Repaying term usually ranges between 20 and 30 years which means many people pay EMIs on their mortgage throughout their  career. An average buyer spends 35-50% of the family’s income for paying monthly loans. Thus, the dream of home ownership brings with it some significant financial burden. 

Another problem related to high housing prices is that buyers are forced to purchase properties located in suburbs. Hence, daily commute takes 2-4 hours in most of the Indian cities.  Higher transportation costs and low access to healthcare and other important services, are other challenges faced by homebuyers in city suburbs. As per studies, households in city outskirts spend an additional ₹5,000 to ₹15,000 monthly on transportation. All those expenses gradually affect affordability of homes for potential buyers. 

Because of the rising home prices in big cities, homebuyers can afford only smaller living spaces. Over the last decade, the average house size in urban India shrunk by 10-15%. In view of this, these days 1 BHK and compact 2 BHK apartments account for a major share of new property launches. Although the size of flats decreased, buyers still expect better amenities and more advanced living spaces from the developers. 

There are several non-financial aspects of the middle-class home ownership problems. Namely, there is this issue of delayed homeownership. Living in rental housing is comfortable as it allows moving anytime. However, buying a home is a much bigger step as there is a higher financial commitment which makes a lot of people wary. Also, at the moment, there is some uncertainty in the market as salaries tend to decrease in some sectors due to technological developments. 

Currently, there are some governmental programmes aimed at tackling affordability issues, but they also present some challenges. Various affordable housing policy initiatives were launched to make housing more accessible to ordinary citizens. Interest rate subsidies for first-time home buyers also exist, but it is quite difficult to find an affordable house in a city centre. Due to rising costs of both land and development, a demand-supply gap exists. Thus, there are obvious challenges linked to implementation of the policies aimed at addressing the issue under discussion. 

Currently, affordable housing should take into account several different parameters such as financial affordability, accessibility of a property and quality of amenities. Finding a way to integrate all these aspects into a cohesive plan is one of the biggest challenges facing India’s middle class. Affordability problem has become more complex due to numerous factors. It is not enough anymore to simply provide more affordable housing; it has become necessary to consider the current market conditions and develop solutions tailored to individual needs.