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India’s Housing Bubble Tops Out? NHB Residex Shows Slowest Rise in House Prices Since 2009

At Capital Mind Premium, last post on the National Housing Bank’s Residex Index, we talked about City level data on housing prices and how it looked like prices were tapering off, but not yet falling. Now we have new data for December 2013, and here’s a quick summary.

Note: There is a much more detailed post for Premium subscribers, with city-level data. It should appear in your inbox today.

A Quick Recap: The National Housing Bank (NHB) publishes an index of housing prices, called the Residex. This is available per-city, and has about 26 cities in there. We have five year price history of only 15 cities and 11 have recently been added.

The methodology involves price collection using private agencies, real estate agents, home loan information on prices from housing finance companies and banks etc. The data is collected and then a weighted average price index is calculated.


The slowdown of a long running bubble is now visible, with prices showing signs of reaching a top. The inevitable wiggles remain, and prices have hit a new high, but price action looks considerably benign. It is likely that some interest from NRI’s on the back of a falling rupee in the Oct-Dec 2013 quarter has propped up prices; but even then the year on year price change is very low.

Capital Mind Premium has build a derived housing index for India, consisting of partial data from Metros, Tier 2 and Tier 3 Cities.


While the price graph is still sloping up, and the index is at an all time high, the change in prices since last year has now come down to 3.3% year on year. This is the lowest level of one year growth in this index since 2008. (We don’t have residex data much prior to that)

The positive sign is that prices are going up, and the slope of the graph, which was flat last quarter, has actually seen an uptick.

Remember that the cycle of real estate is:

  • Low number of transactions, increasing price. Characterised by wonder at why prices are going up, but thinking it won’t do much.
  • High # transactions, increasing price. Usually where people have disbelief – oh, prices can’t be this high. And then anger at having missed the bus. Eventually you just shut up and buy.
  • Low # transactions, high prices. Prices are sticky on the downside, and people prefer to wait instead of selling at a loss or at a low profit. There are just no transactions.
  • Increasing # of transactions, lower prices. “We’ll get out before everyone else!”
  • Quotes showing big crash, but no one wants to sell. 

This is very slow, each level can take years. (It takes days for this to happen in stocks).

  • DJ says:

    I think the more likely scenario could be that we won’t see any decline in nominal prices, but in real prices. In other words, prices are unlikely to come down, and might even keep rising, but they might not keep up with inflation.
    So, in real terms, the values will be coming down (as they already seem to have in 2012 and 2013), but we won’t see declines in the nominal price index. It just seems implausible for housing prices to come down when inflation is so high. That the price increase is lower than inflation will be bad enough…

  • REFollower says:

    Don’t see this trend for new Apartment launches in Bangalore. Just look at the response to Republic of Whitefield (Divyasree), Godrej United, etc.
    Prices only seem to go up (and definitely its not in single digit per year).

    • Famous last words 🙂 But no, we are seeing this in BLR also. Am in sarjapur road where projects are priced high and there are just no buyers. One apartment just sold 20% below the 1st ask! (1.1 cr for a 2800 sq. ft. duplex penthouse)

  • Mangoman says:

    You are spot on. loved your interview in CNBC. You were bit tentative but you did it. Very open and appreciate it.

  • Srinivas says:

    Your argument is counter intuitive.
    I feel the buy side pressure exists, with more and more number of youth getting employed and desire a home of their own. Not that I disregard statistics, but I feel demographics may point to a different direction.
    Good piece.

  • Avinash says:

    Hi Deepak,
    Agree with you completely on the length of a real-estate cycle; most of us have forgotten the late 90’s burst in Indian real estate (i was refreshed by my dad)!
    That said i have a counter-intutive question 🙂 i stay in sarjapur road and looking to purchase an apartment for self-occupation. The transaction you mentioned sounded real value for money; could you share the housing complex where it happened? would be v useful in evaluating!
    thanks in advance

  • Puneet says:

    >Now we have new data for December 2014,
    Dec-2013 you mean?

  • Puneet says:

    Actually you are spot on.
    I also see a lot of inventory about to be lying idle. But rents have not started to go down (not as of yet).
    – Bangalore Bannergatta road area.