Property prices rise 10% CAGR in 4 years2 min read . Updated: 13 May 2015, 10:41 PM IST
RBI's index, however, shows that prices have remained stagnant in the past one year
According to Reserve Bank of India’s (RBI) All-India Residential Property Price Index, in the past 19 quarters, the housing market has witnessed an upward trend in prices. It was released on 7 May along with the survey, Recent Trends in Residential Property Prices in India: An exploration using housing loan data. The realty index showed a compounded annual growth rate (CAGR) of 10.5% between the first quarter of 2010-11 and third quarter of 2014-15, at an all-India level. The index moved from 107 points to 172 points during this period.
However, the index shows that property prices remained almost stagnant between the fourth quarter of 2013-14 and the third quarter 2014-15. “The same trend will continue and no upward movement is expected in the next 2-3 quarters," said Samantak Das, chief economist and director-research and advisory services, Knight Frank (India).
The biggest jump in prices during the 19-quarter period was seen in Jaipur which grew at 12.85% CAGR. The lowest rise was recorded in Greater Chandigarh and Hyderabad at around 7.31% CAGR. This is a quarterly survey and has been made public for the first time. “This kind of a survey and index will bring about much needed transparency in the sector and help homebuyers ascertain the actual price movement," said Anuj Puri, chairman and country head, JLL India.
The index was created by RBI to monitor residential asset prices in the country. Back in 2009, RBI had set up an expert group on asset price monitoring system. It had recommended putting together a real estate price index using data generated on a quarterly basis with financial year (FY) 2009-10 as the base year. The quarterly survey was launched in July 2010.
For the index, the group recommended to consider appraisal value of properties calculated by financial institutions at the time of giving home loans, instead of the actual transaction value. At present, it covers 35 banks and housing finance companies and they provide data for 13 cities.
The data collected includes address of property, floor space area, date of first loan disbursement, cost of property, estimated price of the property by the bank, first borrower, occupation of borrower, gross assessed monthly income and loan amount.
According to the survey, in FY2013, house prices grew faster than rents. However, since then, it has moved at tandem.
The survey not only shows trends in real estate prices, but also compares returns from other investment avenues such as gold and equity with the housing sector.
It shows that between the first quarter of 2011 and third quarter of 2015, equity outperformed gold and housing.