The Reserve Bank of India (RBI) releases the House Price Index every quarter for 10 major cities, including Mumbai, Delhi, Bangalore, Ahmedabad, Lucknow, Kolkata, Chennai, Jaipur, Kanpur, and Kochi. The HPI is calculated based on the official property transaction data received from the Stamp and Registration Department of the respective states in each of the above-mentioned cities.
“HPI growth (y-o-y) varied widely across cities and ranged from an increase of 9.0 percent (Ahmedabad) to a contraction of 5.5 percent (Delhi),” the RBI said.
The HPI is a weighted average price index calculated using the Laspeyres Price Index method. The Laspeyres method is an index formula utilized in price statistics to measure the price development of items consumed in the base period, which, in the HPI, is FY 2010-11. It helps determine the current price of items (residential properties, in this case) which consumers purchased in the base period (FY 2010-11).
The HPI represents only the prices of residential properties that have sold during a period and not all the residential properties in the city at one particular point in time.
Limitations of RBI’s House Price Index
In many instances, the transaction price recorded at the office of the Sub-Registrar of Assurances is not the actual price paid by the buyer. There is an impression that registered house prices are generally understated to pay lower stamp duty and registration fees. Hence, the HPI may not be completely accurate, but it serves as a general indicator of price movement in the residential market.
Although the RBI’s data does not take into account factors such as location and property type, among others, it does provide an overall picture of price movement.
The profitability of residential real estate diminishes when we combine the amount of investment involved with additional costs, such as stamp duty, registration fees, property tax, and property maintenance fees. Although, the demand for housing is never going to fade away any time soon.
To make an informed investment decision, you should research the market you intend to invest in and understand what the dynamics of the market are. Additionally, you should consult a financial advisor or a real estate agent who has experience in the market.
Kishan Thakkar is working as a writer for the real estate and architecture industry. His experience includes working for various reputed firms. He is currently pursuing MBA in Business Management and handling operations for The Real Talks platform. He has a penchant for research, analysis, and understanding various fields. Discipline is the key to balance his diversified interest and work routine.