Calcutta has toppled Hyderabad to become the most affordable city for buying property in the country even as doubts persist if this will be an incentive enough for homebuyers to come out and shop.

A study by JLL shows that properties in all the major seven cities have become more affordable in 2020 than before as a marginal dip in house prices along with the lowest mortgage rate in 15 years blunted the effect of impairment in household income that many families experienced this year.

The study considered a household income that is enough to buy a 1,000-square-feet apartment by taking up loan from public sector banks for 20 years. To deduce the eligible household income, it was assumed that 80 per cent of the property value will be taken as loan and the loan value will be 40 per cent of the gross total family income.

The study finds Mumbai to be the only city which continues to be out of reach for many homebuyers even as the affordability has more than doubled from 2014. Calcutta, in contrast, is twice more affordable than Mumbai. (see chart).

However, the overall affordability has not translated in higher sales so far. These seven cities recorded sales of 14,415 units during July-September compared with only 10,753 units in April-June, but less than half of what was witnessed in the same period of 2019.

A previous JLL study, which only focused on the Calcutta Municipal Corporation area and Rajarhat, showed a sequential decline in sales in the previous quarter.
“It is indeed heartening to note that Calcutta is now the most affordable city to buy a property. But will people buy? Are there enough drivers in this city? I’m afraid not yet,”

Samantak Das, chief economist and head of research at JLL, asked. Cities such as Pune and Hyderabad, having less population than Calcutta, registered more sales in residential apartments, he added.

Harsh Patodia, chairman of Unimark, the company which is building Trump Tower in Calcutta, said the requirement of office space is directly proportional to the demand for residential units.

“If we see the office space absorption numbers, Chennai, Bangalore, Hyderabad and Pune scores many times higher than Calcutta. New office space would translate into new jobs, creating also a demand pull for residential property,” Patodia explained.

Anecdotal evidence suggests that the city is still not on the radar of global investors or fund managers. During a recent meeting with a property consultant, a fund manager specifically asked Calcutta to be left out of the consideration while examining investment in the real estate sector, citing the urban land ceiling act that limits agglomeration of land parcels to an individual beyond 7.5 cottah in cities. The global investor also suggested that the Bengal “ecosystem” was not conducive.