How to track property prices

S.C. Dhall

Though there are some realty indices, their utility is limited. A homebuyer still has to do a lot of homework to ascertain the correct property price.

Identifying the true value of a property is equally important for a buyer and a seller, and especially so in the prevailing subdued real estate market conditions. For a seller, quoting an unreasonably high price will shut down a genuine enquiry, and quoting too less will lead to lower profit. For a buyer, paying more than what a property deserves can reduce the potential return from it. Thus, even though the information on prices is crucial, it is not easily available in our country.

There are three key indices developed by different agencies that can be used by buyers as well as sellers. These indices differ from each other based on the data source that they consider to build the index. For instance, National Housing Bank’s (NHB’s) Residex takes into account actual transaction prices of properties to build the index. Primary data on the housing prices is collected from real estate agents, housing finance companies and banks, which is based on housing loans contracted by these institutions.

Another index is the Housing Price Index (HPI), which has been developed by the Reserve Bank of India (RBI). This one is based on official data available on property price transactions collected from registration authorities of respective state governments. 

There is one more index from RBI, which started only in May 2015, called Residential Property Price Index (RPPI). This takes into consideration property values as appraised by the bank or housing finance company while giving home loans. All these indices are dependable and useful.  

However, the problem with these indices is that most of these are not updated regularly and thus do not reflect the most recent trends. So much time lag dilutes the purpose of having these indices. If someone has to buy a property in the near future, price trends of a year back are not helpful. In many developed real estate markets, indices are more robust.  

Unlike many developed countries where there are set standards for collection and analysis of data, there are no set guidelines to follow in India. Furthermore, these indices provide city-level price trends whereas real estate is a heterogeneous market in which properties, even in the same locality, command different prices. Therefore, you may not be able to determine the property price of a particular apartment or a house with help of these indices.

Customers cannot rely solely on these indices to plan their investment decisions. If you are a buyer or a real estate investor, these indices can be used to get a sense of how property prices are moving in a particular city.

The indices do not give the actual price, but are useful to know the general trends in a city or locality. However, with no real time indices available, it is a challenge to take a decision based only on the indices

Property prices also depend on factors such as location, locality, construction quality, amenities and economic and socio-cultural level of the area. It is very difficult for an index to take all these into account

The most realistic way of checking property value is figuring out at what rate a similar property was bought or sold in the area, in the past 3-6 months. Take the help of neighbourhood real estate agents to get an idea.

Alternatively, one can check on realty portals such as 99  acres com, housing com.   and   magicbricks.com. Some of these websites have their own indices, based on data collected from real estate agents, advertisements posted by individual sellers, and their own data collection agents. These indices give a more micro perspective of property prices.  

Besides these, a few banks and financial institutions also have ready reckoner of property prices.  Buyer/seller  can also look at a few other sources. Rates published by respective state governments (also called ready reckoner rates, circle rates, guidance values in different states) is another yardstick to validate information gathered from developers, brokers and advertisements. These are the minimum rates at which stamp duty has to be paid on a plot, independent house, or flat in a locality. If you are still not satisfied, you could approach a property valuer.  

As of now, information on property values is available in a piecemeal fashion. Every entity that provides such information uses its own set of parameters.

To be relevant and useful various property price indices should  provide more recent data.