We examine the quarterly House Price Index (HPI) for All India and for major cities that was released by the RBI via the Database on the Indian Economy (DBIE) to gauge trends in the Indian Real Estate market.
Indian real estate is continuing its trend of a slow bottoming out of prices. Even though the actual change in price is still positive overall, the rate of change has been falling over the last few years implying sluggish markets.
As explained in previous posts, it must be mentioned that the data does not capture the “black” component of real estate prices and may also be shifted upwards due to the fact that ready reckoner rates in cities continue to increase. Keeping this in mind, the actual value of price change must be taken with a pinch of salt, but this exercise is useful in showing the trend in prices in the cities and across the country.
The major metros are continuing to show signs of stabilisation. Ahmedabad is starting to see a slight pickup while Chennai and Bangalore are starting to see a further correction in prices.
The smaller cities are seeing a divergence, with Jaipur and Kanpur showing a sharp uptick in prices; while Lucknow and Kochi continue to grind lower.
The real estate sector is going through a number of structural changes. After the boom years, the industry has been consolidating for five years now. The government has also introduced a lot of new legislation such as RERA, GST and demonetisation, all with a view to clean up the sector. On the whole this is a very healthy correction and we will likely see a much more formal, transparent and efficient sector in the years to come.
Rishad is the founder of Kairos Capital. He started his career with Standard Chartered Wealth Management and has extensive experience in markets, particularly in terms of mutual funds and stocks.