Realty Needs Indices Similar To Equity Market

The Real estate industry in India has been growing by leaps and bounds in the past few years. However, the country still lacks a credible way to cross-check the price swings (real or reported) in the sector. For example, recent reports of residential prices cooling off in major cities of the country could not be verified.

There was no authentic data to indicate such a trend. Thus, property buyers remain confused, not knowing, for instance, whether Mumbai property prices fell more than that of Delhi in the last quarter?

The same does not happen with equity investors. At the end of the day, anyone wants to know the day’s market trend and for this he could take help of BSE/NSE website or see next day’s newspaper to know the exact rise or fall of Sensex or Nifty. Sensex or Nifty are taken as a barometer of market sentiment. With years of index publishing, a sort of credibility and association has been built with the equity investors by these financial institutions.

NHB made a beginning in this direction in 2005 when it launched a project for preparation of the real estate price indices for the residential housing segment, NHB Residex. To start with, the project envisaged compiling the indices for 10 cities — Greater Mumbai, Kolkata, Delhi, Chennai, Bangalore, Hyderabad, Ahmedabad, Kanpur, Jaipur and Patna. It also gave price appreciation figures for major cities at the time of the launch of the index. However, getting data from NHB has been tough for analysts.

With various mutual funds planning to soon launch real estate funds, it is imperative that a reliable index data, preferably from a government body like NHB, is made available to act as a benchmark.

Capturing real estate prices in India has its own challenges. Thanks to different types of housing that are made available by builders, there are large variations in property price in a single locality. It is difficult to put a single price to a locality which has different class of houses, say premium as well as low cost.

However, NHB with its wealth of information on loan disbursements and other crucial figures could do a lot for the industry. Since most financiers would have data on a city-wise basis, it could be shared with NHB for internal index calculation purposes. If NHB cracks the same, it could be one big step towards making the industry more competitive.

One Comment

  1. Posted May 28, 2008 at 6:30 am | Permalink

    yes it is true becuase without equity market realty sector will not be possible to do that level.

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