The Reserve Bank of India (RBI) has initiated an exercise to set up a housing start-up index (HSUI) to track new residential projects in 31 major cities and measure the changes in construction activities.
The HSUI will cover new residential projects in all major cities including Delhi, Mumbai, Chennai, Kolkata and Bangalore, among others, RBI said while inviting quotations from consultancy companies. RBI said housing start¬ups in a particular quarter would be estimated from the permits issued in that quarter and the various past quarters by using the rates at which the permits got converted into start-ups in the recent past. “The periodicity of this survey will be once in three years.
The agency needs to visit about 350 sites to get the details on house start¬ups in each city,” RBI said in the tender notice. The housing index will give insights into consumer activity because construction of new houses typically require large investment. “It depicts forward trends in the economy.
An economy that is growing rapidly has an increased demand for housing and HSUI could be used to forecast demand for new houses,” it said. The index would also act as an indicator of economic growth as more houses would lead to increased demand for input materials such as steel, cement and credit. The data on housing would be collected for eight quarters.
This data will be processed through a co-efficient matrix to arrive at the actual data. It can be noted that the National Housing Bank (NHB) had last year decided to expand an index of residential real estate rates from the five cities it covers at present to 36 cities. The index, called the NHB Residex, which is the country’s first official residential property price index, now covers Bangalore, Bhopal, Delhi, Kolkata and Mumbai. In the United States, the federal government regularly releases housing starts data. Building permits are also released with the housing starts data.
By being aware of the monthly number of permits issued, analysts estimate trends for the upcoming months. Housing starts and permits are an important indicator of future economic activity. A rise in housing starts can lead to a fall in the bond market and vice versa. A continued slide in housing starts can lead to an economic slowdown and a recession.
