NHB Residex, House Price Index and National Housing Bank

NHB Residex is a benchmark that measures the price changes of residential housing in Indian cities.  A House Price Index (HPI) basically tracks housing price indicators in a city or state or country. 

NHB Residex and National Housing Bank (NHB)

The index  is a tracker designed by a technical committee comprising of lenders, key market players and government representatives.  It is maintained by National Housing Bank. The benchmark aims to track housing price movements across major cities in India.  Various statistical models, based on methods like simple moving average (SMS), hedonic regression (HR) and repeat sales regression (RSR), are applied in a house price index.  Housing price is a function of various parameters like interest rate, economic activities in the country, inflation, policy decisions, disposable income and demand-supply position.

National Housing Bank (NHB) was set up on July 9, 1988 with the aim of promoting housing finance institutions and markets in India.  It is wholly owned by Reserve Bank of India. The main objectives of NHB are augmenting resources for housing sector and making housing credit more affordable. 
The NHB Residex was initially launched in July 2007, but discontinued in 2015. It is the first HPI of the country.  The index is refurbished and relaunched in  July 2017 with a new base year of 2012-13. Presently, 50 cities are covered which will be enhanced to 100 in a time bound manner. The index depends on various data sources like market studies, data from banks and major housing finance companies for the assessment. 

The index currently publishes two sets of Housing Price Indices (HPI) relating to the cities it tracks.  They are published on quarterly basis. ‘Market HPI’ records prices of properties under construction based on data collected from developers.  ‘Assessment HPI’ captures data from Banks and housing finance companies. NHB plans to launch other indices covering rental value, land prices and prices of building material also

The index is computed in relation to the carpet area of the house. Based on the carpet area, there are three categories: Below 60 Sq.Mt, 61-110 Sq. Mt. and above 111 Sq. Mt. 

Which are the major cities tracked by NHB Residex?

The cities covered by the index are scattered over 18 states and union territories. The cities include smart cities and state capitals. Some of the cities covered  are Jaipur, Chennai, Faridabad, Chandigarh, Patna, Howrah, Hyderabad, Bidhannagar ,  Nashik,  Gurgaon, Mumbai, Vadodara, Chandigarh, Bhubaneswar, Visakhapatnam,  Coimbattore,  Ranchi, Gandhinagar, Raipur, Kanpur, Surat, Ludhiana, Kolkata, Lucknow and  Guwahati. 

What advantages does the NHB Residex offer?

The index acts as a supporting tool to check and compare prices before entering into agreement for a transaction. Both, buyer and seller are benefitted from knowing the price movement.  They can take informed decision by checking and comparing price movements in nearby cities and localities, price of houses of comparable carpet area etc.  Promoters depend upon the index to assess the demand in a particular area while lenders utilize it for credit evaluation.  Analysts track the index to assess housing market trends. Investors can fine tune their investment decisions by calculating possible returns in future by studying the trends.

Residential housing deals are negotiated between buyers and sellers and the price often depends on the negotiating power. Supply and demand positions also influence price determination.  In the housing segment,   prices vary widely between cities and even in local areas. Hence a tool like NHB Residex offers more transparency in price determination by buyers.