House Affordability Survey: RBI | 12 Jul 2019

Reserve Bank of India’s quarterly residential asset price monitoring survey (RAPMS) on housing loans has shown that housing affordability has worsened over the past four years as the House Price to Income (HPTI) ratio increased from 56.1 to 61.5 (from 2015 to 2019).

• The RBI has been conducting a quarterly Residential Asset Price Monitoring Survey (RAPMS) since July 2010 on housing loans disbursed by select banks and housing finance companies (HFCs) across 13 cities.
• Mumbai (with a HPTI of 74.4) remains the least affordable city in India, while Bhubaneswar (54.3) remains the most affordable city.
  
  • The concept of price-to-income ratio is used by lenders to measure affordability of residential property, essentially as a measure of purchasing power for home buyers.
• The LTV (loan to value) ratio moved from 67.7% to 69.6% (2015 to 2019) showing that banks are getting more risk-tolerant in housing loans and are willing to offer higher loans against the value.
  
  • LTV is the amount of loan a lender is willing to give and is calculated in terms of the percentage of the property value.
• The loan to income (LTI) ratio also confirms worsening housing affordability (3 in March 2015 to 3.4 in March 2019).
  
  • Loan to income ratio (LTI) is calculated by dividing the total monthly debt obligations, such as minimum credit card payments, auto loan, student loan by net monthly income.
  • The ratio is calculated on a monthly basis and helps lenders evaluate how much additional debt an applicant’s financial situation will allow him to handle.
  • A low LTI value shows a good balance between debt and income.