By Vipin Agnihotri
You can term Residex as a Sensex for residential house prices. Residex, India’s first housing price index compiled by National Housing Bank will not only give an indicative trend of the prices of properties in different cities but also serve as a benchmark for different users.
In my opinion, it’s a welcome step because Residex can be used by home buyers, brokers, policy makers, developers and housing loan companies to take informed decisions on cities or localities.
With Residex being a non-biased reference point to understand market trends, experts is of the view that lenders can protect themselves from over valuing a property and lending greater amounts. On the other side of the coin, buyers can bargain better looking at the index.
There is no doubt in my mind that Residex will also give an idea of the parallel economy in real estate transactions and policy makers can use this to minimize stamp duty on transactions to increase compliance, besides other policy interventions.
It is worthwhile pointing that the Sensex tracks India’s 30 most valued and transacted companies, while Residex will collect data and track fluctuations in the property market. There is a strong possibility that Residex will remove the opacity in the market and allow for more efficiency in market pricing. It has come into the notice of The India Street that Residex will throw up a uniform kind of approach for evaluating the prices in different locations and hence allow for a more homogeneous property market.
Theoretically speaking, Residex looks at five cities, namely, Bangalore, Bhopal, Delhi, Kolkata and Mumbai with two sub groups in Kolkata and Mumbai. National Housing Bank proposes to increase the Residex to 63 cities covered under the Jawaharlal Nehru Renewal Mission scheme and eventually move toward a National Index.
The real estate price index in India assumes high importance in view of the contribution of the sector to the national GDP. The key difficulties in index development are low accuracy of data because of the sector’s heterogeneity and illiquidity, high data requirement due to diversity and non-standardization of real estate units. The ultimate usefulness of Residex will depend on its accuracy, which will be based on factors including the source of data collection.
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