NHB RESIDEX is India’s first official housing price index. Designed and managed by the National Housing Bank (NHB), the index keeps track of changing prices of residential properties in major Indian cities.
The base year for Residex is 2007. The index is fixed at 100 for this year at all cities. Based on the increase or decrease in prices, the index in each city moves up or down in proportion. Notably, the index focuses on change in pricing, and not the actual price of properties.
The data for calculating the index is sourced from actual transaction prices of properties. Real estate agents, housing finance companies and banks are surveyed for this purpose. The index is calculated on a quarterly basis.
The main reason behind launching RESIDEX was to guide all stakeholders who are directly or indirectly connected with this sector. Since real estate assets are a major component of private sector wealth, it is important to track its increase and decrease. The trends could also be useful to housing finance companies for making informed choices on their strategy in different cities. The data could also be used to decide circle rates by local government authorities, an important metric which impacts tax revenue generation.
National Housing Bank (NHB) was given the responsibility of formulating the index, as well as managing the subsequent process of data collection and collation. Initially, the index was launched for 5 cities; Bangalore, Bhopal, Delhi, Kolkata and Mumbai. Now, the index track residential property prices across a range of major cities in India.
However, there are some drawbacks of RESIDEX. One issue is the lack of availability of recent data. The most recent data available on the website of NHB Residex is up to March 2015. Such a lag, reduces the usefulness of the data for stakeholders. Another major drawback is that the index can only track changes at a city level and cannot be used to make decisions on specific properties in specific areas of a city.
Currently, RESIDEX tracks prices for residential properties alone. In the future, it is planned to launch similar indices for commercial properties and residential rentals. Plans have been made to cover more cities as well.
In developed markets, indices are typically more granular and updated. For example, The S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index seeks to measures the value of residential real estate in 20 major U.S. metropolitan areas on a monthly basis. The Federal Housing Finance Agency of the USA also publishes House Price Index on a monthly and quarterly basis. Countries like the United Kingdom also has a House Price Index, which tracks residential housing prices monthly using house sales data from government records.