Report of the Expert Group on Asset Price Monitoring System

Real estate activity represents a key engine of economic growth. Residential as well
as commercial house property forms an important part of asset formation; it
provides an assured stream of return and utility value to the owner of the property
by way of rental earning, durable consumption in the form of shelter and other
residential/ commercial services, as also its use as collaterals for availing loans. Lack
of transparency in the residential property market transaction, absence of a single
centralised regulator in a vast country like India and limited availability of price
information pose important challenges for keeping track of real estate price
dynamics and their relationship with financial stability and monetary policy.
Therefore, it is crucial to have a realistic measure of aggregate house price in order to
understand the behaviour of house price and their influence on the economy.
Reserve Bank of India had set up an ‘Expert Group on Asset Price Monitoring
System’ with the objective of developing an information system on asset prices.
Accordingly, a group of experts from ISI, CSO, NHB, IGIDR, SBI, ICICI and HDFC
has been engaged in working out a framework for quickly deliverable dimensions of
Real Estate Prices in quantitative terms, preferably in a frequent manner that could
be useful for monetary policy and financial stability purposes.
Recommendations: After several deliberations Group finalized its Report with
following observations/recommendations:
• Real estate property price data can be collected in the form of sale/resale price
directly from scheduled banks (including both commercial and urban
cooperative banks) and selected housing finance companies. Presumably,
transaction level data are available in electronic form with these organisations
(Para 5.4.3, Page 43).
• House price data can be collected at transaction level from top 13 centres: Greater
Mumbai, Chennai, NCR Delhi, Bangalore, Hyderabad, Kolkata, Pune, Jaipur,
Greater Chandigarh, Ahmedabad, Lucknow, Bhopal and Bhubaneswar (Para 5.5,
Page 43).
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• For monitoring purpose, RBI needs to track both sale/resale price index as well
as the rent index of real estate prices on a regular basis (Para 5.7, Page 44).
• Considering the practical difficulty of collection of house rent data, the Group
recommends using official data on house rent index of CPI (Urban) which is to be
released by CSO. (Para 5.7, Page 44)
• The Group recommends compiling real estate price index on quarterly intervals
(Para 5.8, Page 45).
• As the data are being sourced from the banks and select housing finance
companies, survey schedule is basically a return prescribed for the said purpose.
The proposed return includes variables like type of property (including both real
estate and commercial), address, type of transaction, valuation price of the
property, purchase price of property and loan amount taken from the bank other
than the information on certain characteristics of the borrower viz., gender,
employment, monthly income, etc. (Para 5.9.1.3, Page 46).
• Price index may be compiled based on Laspeyre’s index method with financial
year 2009-10 as the base (Para 5.9.1.3, Page 46).
• The Group felt necessary to supplement the bank data through a survey
conducted annually so as to ensure robustness of the data available with the
banking system (Para 5.10, Page 46).
• The proposed statistical system may be structured organisationally as a separate
unit in the Statistics Department of RBI (Para 5.11, Page 47).