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NHB moots Indexing the Residential Property Prices

NHB moots Indexing the Residential Property Prices : Jan 18, 2005
January 18, 2005

Who does not dream of owning a ‘Sweet Home’ at some stage in one’s life? Viewed as a lifetime investment, most of us are concerned about having a good trade-off between the price and quality as well as the facilities. A market place based on efficient price determining mechanism and transparent practices can ensure a fair deal to the prospective home buyers. While there is a measurable relationship between the residential property prices and the various backward and forward linkages it has in the economy, there has been no concerted effort to capture the same.

Till now, whatever little information is available to the home buyers and investors, is provided by local real estate agents and investment advisors, who have somewhat limited knowledge and can not be considered to be independent or objective in their opinions. With the persistent boom of the housing sector, which has registered a growth of 30% last fiscal too, there is a need to monitor the movement of value of the underlying assets (i.e. the real estate) and ensure that there are no undue mark-ups on either side of the economically efficient pricing. In fact, there is a need for reliable, unbiased information about the long-term performance of residential property specifically in terms of its pricing and their movements over time.

Realising this need, National Housing Bank (NHB) has made a beginning in this direction. Shri P.K. Gupta, Chairman & Managing Director, NHB, today launched a project for the ‘Preparation of the Real Estate Price Indices for the residential housing segment [NHB RESIDEX]’. To start with, the project envisages compiling the indices for select ten major town/cities e.g. Greater Mumbai, Kolkata, Delhi, Chennai, Bangalore, Hyderabad, Ahmedabad, Kanpur, Jaipur and Patna.

At function organised on this occasion, Shri Gupta informed that these indices will be useful for various stake holders i.e. Government and policy makers, housing finance industry, builders as well as individuals.

Elaborating further, Shri Gupta mentioned that the Government and policy makers can use these indices for assessing the movement in the housing stock and its price variations over a period of time on spatial basis as well as by category of construction. These indices can also be used to assess the gap, if any, in the reported and actual market prices of the properties in different localities/regions and State Governments/Local Authorities can make their use while formulating their policies on Property Tax/Registration Fee etc.

Shri Gupta further informed that the housing finance industry can make use of these indices to assess the likely demand for housing finance in various regions of the Country. Similarly, builders and individual buyers can also benefit by interpreting the indices to get an idea about indications regarding demand and price movements of different type of houses in various regions/localities.

Shri Gupta also mentioned that NHB will have interaction with various organisations, interested groups and stakeholders in this area while finalising the model for preparing the Real Estate Price Indices. To start with, these indices would be prepared on quarterly basis. Subsequently, based on the experience the coverage and the periodicity may be revised.