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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).


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