The average cost of buying a house has decreased by two percent in a period of last four years.

Whereas back in 2005, the average cost of house was 4.6 times that of average annual earnings, today it has decreased to 4.5 times that of average annual earnings today.

In 2007, the affordability factor increased to 5.1 percent, reasoned by the sharp rise in real estate prices.

Affordability is based on annual income of the borrower. If the loan cost is 4.5 times the annual income, the average EMI is 50 percent of buyer's income on a loans of 15-year tenure.

The improved affordability has led to increase in sales, as reasoned by Renu Sud Karnad, joint MD, HDFC, -"in this quarter, we have seen good increase in demand compared to January March 2009. We expect demand to improve over the next couple of quarters as the total cost of acquiring property has come down substantially."

Realizing the need and demand, many real estate developers in India have started working around the ‘affordable housing' projects.

Recently, Tata Housing Finance launched its low-cost affordable housing project named the Shubh Griha.

The lowering of the interest rates coupled with special mortgage schemes launched by banks like SBI have increased demand for housing finance.

Bankers however do not expect interest rates to lower further.

With increase in affordability, the demand and correspondingly the prices are expected to pick to in near future.

The union budget 2009-10 has proposed allocation of Rs. 2,000 crore to the National Housing Bank for funding low cost housing projects to provide boost to `affordable housing.'