The rise in housing prices and mortgage rates have impacted affordability levels to buy homes in the last two years across seven major cities but it may improve next year due to a likely reduction in repo rate, according to JLL India.

The improvement in affordability levels would further boost housing sales, which have risen despite increases in property prices and interest rates on home loans.

The consultant on Sunday released its ‘Home Purchase Affordability Index’ (HPAI), which signifies whether a household earning an average annual income (at an overall city level) is eligible for a housing loan on a property in the city at the prevailing market price.

“The rising repo rate in 2022 as the RBI reacted to the global recessionary and inflationary trends, plus a strong demand recovery spurring price hikes, worsened affordability in 2022,” the report said.

In 2023, the consultant said that affordability levels are likely to marginally worsen or remain the same when compared to 2022.

A stronger price increase has been countered by stagnancy in repo rate movement, declining inflation and relatively higher growth in household incomes, the consultant explained.

“In 2024, we are likely to see a renaissance with affordability levels expected to be on an improving trajectory as macroeconomic fundamentals support a repo rate reversal and thereby interest rate reduction that could provide another fillip to the residential sales market,” the report said.

JLL expects a 60-80 basis points reduction in repo in the next year.

It has derived this index through a combination of variables, which include home loan interest rates, average household income and price of the residential apartment.