The NHB Residex (an
index constructed by National Housing Bank (NHB) based on "actual
transaction prices") covers 26 cities all over India. The index stood at
100 in 2007 for each city.
For January-March
2014, the all - India index was 178.69 (arrived at by taking a simple average
of the index levels for the 26 cities).
An increase from the
base value of 100 in 2007 (on, say, 30 - 6 - 2007) to the recent value of
178.69 (on, say, 31 - 3 - 2014) translates to an average appreciation rate of
8.97 % annually.
This by itself is
lower than the appreciation rates most people have in mind when they think of
appreciation in the price of residential property in urban India. So, the
public beliefs are not correct. However, there is even more to the story. There
has been an average annual inflation rate of about 9.25 % since 2007 - 08 (this
is based on the data used for computing real capital gains for income tax
purposes). Inflation eats into whatever returns there are.
An 8.97 % nominal
appreciation alongside a 9.25 % inflation rate implies the real appreciation
rate over the period 2007-14 is a negative 0.28 % annually.
Let us simplify and
say the real appreciation has been zero. This is the basic story according to
NHB data. This contradicts widely held beliefs in India.
A weighted average
across 26 cities instead of a simple average can increase the computed
appreciation rate but not enough to change the basic story.
There are
considerable regional variations. Chennai has witnessed real appreciation of
nearly 11 % annually, whereas Kochi has seen real depreciation at an average
rate of nearly 11.5 % every year since 2007. Delhi & Mumbai have seen
average real appreciation of 1.47 % and 3.8 %, respectively.
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