Does NHB Residex reflect the actual price line at the macro level? A look by K. Sukumaran
About four years ago, Residex was launched by the then Finance Minister, P. Chidambaram, at a function in which the Minister for Urban Development, Shailja, was also present. Residex was meant to be a large and reliable database of housing prices, which can be used for policy denominations and for use by lending and investing public and private institutions.
Little do we hear about it in day-to-day market reports, though the data is updated periodically and posted in the National Housing Bank (NHB) web site.
A few days ago, the NHB released the findings of a survey conducted by it on housing prices across select cities, according to which housing prices are firming up.
Residex is a mechanism for tracking the price movement of the residential housing segment.
An expert group set up under the NHB, consisting of technical experts from RBI, NHB, Finance Ministry, Ministry of Urban Development, Labour Bureau, and other market players, overviews the data formulation and end-product arrived at.
Base data (marked as 100) was created initially and updated quarterly thereafter.
Pilot study was conducted covering Delhi, Mumbai, Kolkata, Bangalore and Bhopal.
Actual transaction prices were considered for the study in order to arrive at an index which will reflect market trends.
Year 2001 was taken as the basic year for the pilot programme.
Index has been constructed by using the weighted average methodology with price related method.
Primary data on housing prices was collected for different localities and tax zones from real estate agents (by entrusting the work to private consultancy agencies/research organisations), housing finance companies and banks.
As per the index updated as at the end of June, 2011, housing prices are firming up, in the background of reducing demand in the wake of rising interest rates for loans.
The NHB survey has covered 15 cities, viz., Ahmedabad, Bhopal, Bengaluru, Chennai, Delhi, Faridabad, Hyderabad, Mumbai, Kolkata, Lucknow, Pune, Jaipur, Kochi, Patna and Surat.
As compared to March-end, 2011, Bhopal leads in the percentage of rise at 33.73 followed by Faridabad at 33.38 and Kochi at 24.30.
The lowest rise is in Pune (1.1). Kolkata and Jaipur registered a negative position at ( –) 8.21 and( –) 4. 70.
Among metros, Kolkata showed a rise in the first quarter of 2011, though it fell back during April June. Patna did not show any change at all.
The above figures indicate an increase of 81 per cent for apartments and 116 for plots in (highest) in Bangalore-Basavanagudi.
If base data is taken as 100, the rate will be 181 per cent for apartments and 216 per cent for plots, as against 192 for the whole city.
This leads us to believe that the aggregate average index does not reflect the location-wise price movements.
Further, the price at which the transactions are registered may go with the guidance value fixed by the government, whereas the actual price at which the deal has been made may be higher.
Therefore, there arises a need for refinement in the Residex before it is universally applied, so that the dealers/investors could take it as a benchmark price.