The Reserve Bank of India is planning to introduce two real estate indices, one exclusively focusing on the movements in commercial realty prices and the other devoted to residential property rates Lack of transparency, limited availability of property price information and absence of a centralised regulator are the three key impediments for property investors. A recent report published by the Reserve Bank of India (RBI) on ‘asset price monitoring system’ has termed these as major challenges for keeping track of the property price dynamics in India.
Of late, RBI is planning to introduce two real estate indices—one exclusively focusing on the movements in commercial realty prices and the other devoted to residential property rates. Experts opine that the indices will definitely help gauge the asset price movement in the country. General public, also, has expressed the same opinion as a record 100% answered in the affirmative during a recent poll conducted by ConstructionBiz360.
 “This is a good move by the apex bank. The property price indices will come handy for investors, financial markets as well as customers,” says Ashwini Singh Virk managing director of Jagson Realtors, a mid-sized property firm in New Delhi.
Benefits
Countries such as Canada, Hong Kong, France and the US have property indices. “It is imperative for a vast country like India to have its own realty index as it not only helps to keep track of the sector’s price dynamics but also determines their relationship with monetary policy and financial stability,” says Anuj Sharma, a Noida-based property analyst.
In addition, such indices will help investors to compare the performance of real estate with other asset classes such as bonds, stocks etc, thereby helping them to better understand the risk and returns associated with the sector, especially commercial realty. Moreover, it would also help to measure the housing sector’s performance in terms of income generation.
The RBI report has recommended revising the indices every quarter. To compile data on property prices (both sale and resale prices), the report suggested consulting banks and home finance companies (HFCs) instead of developers. Furthermore, it said that initially RBI can collect data for Delhi and Mumbai and then subsequently add cities such as Kolkata, Chennai, Bengaluru, Ahmedabad, Hyderabad and others.
Jeeta Bandopadhyay |
