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Govt Plans To Start Housing Index Soon, Will Reflect Availability Of Stocks, Realty Prices

By parul118, Section Real Estate
Posted on Mon Nov 05, 2007 at 11:08:44 PM EST

On the lines of consumer price index, the government is working on a Housing Startup Index (HSUI) which will reflect the availability of housing stocks and real estate prices in cities across the country.

The startup index is to be developed by National Building Organisation (NBO) under Kumari Selja headed housing ministry, will project details of construction activity and its impact on prices of construction related items like cement and steel. HSU Index will be measured at national, state and city levels. NBO has set up a technical advisory group to evolve a methodology to institutionalise the process of bringing out HSUI on a regular basis. Pilot surveys in Chennai and Mumbai have been started.

Housing ministry officials said a rise in the index would indicate economic growth, potential rise in real estate prices and potential pressure on interest rates. Conversely, a fall in the housing index would mean a fall in real estate prices and interest rates would follow suit. It would also mean that GDP growth is slowing.

Explaining the methodology, a housing ministry official said the HSU Index would be a measure of the actual number of residential units on which construction had begun with respect to the total permits for construction issued each month and the level of housing index would be an indicator of residential and commercial construction activity.

The index, which is measured in US and Canada, will echo the commitment of builders to new construction activities. Also, high construction activity is usually associated with increased economic activity, and can be considered an indicator of where short-term interest rates might go.

While individual buyers trading in stock market and builders can benefit by interpreting the indices to get an idea of demand and price movements of different types of houses in various regions and localities, the housing finance industry can use the indices to assess the likely demand for finance.

The index will also mirror the owners' social groups like SC, ST, OBC and general and construction activity in different sectors like residential and commercial.

The index would also provide data across variables like owners' income level, occupational and social groups and sources of finance, said an official. Sources in the ministry said it was premature to assume how such data would be collated, since there was a lot of illegal construction.

"We are taking the help of local bodies, which issue permits, to collect data. However, there is no doubt that unauthorised construction is going to be a major problem for us," said an official.

Source:TOI,06 Nov,07

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