BTL 852 - House Price Index (HPI)

 

The Banking Tutor’s Lessons

BTL 852                                                                                                21-12-2025

House Price Index (HPI)

A Housing Price Index (HPI) is a statistical tool tracking changes in residential property values over time, showing market trends for buyers, investors, and policymakers, often using transaction data with a base year (like 2017=100 in India) to show growth or decline, with sources like India's NHB Residex and private firms providing indices for cities and nations.

HPI Measures:

Price Movement: It reflects systemic price changes, not just averages, for different property types (new/existing).

Market Health: Indicates market cycles, investment potential, and economic shifts.

Key Components & Calculation:

Data Sources: Uses property registration data, developer sales, surveys (price per sq. ft. quantity).

Base Year: Sets a starting point (e.g., 100) for comparison.

Weighting: Reflects weighted price changes, making it more accurate than simple averages.

Examples in India (as of late 2025 data):

NHB Residex: India's first official HPI, base year FY 2017-18, updated quarterly.

Housing.com HPI: Tracks major Indian cities, normalized to 100 in Jan 2017.

RBI HPI: Shows year-over-year growth (e.g., 4.34% in Sep 2024).

Factors Influencing HPI:

Inflation & Money Supply: More money chasing same goods raises prices.

Interest Rates: Low rates boost demand and prices.

Supply & Demand: Limited land (large cities) magnifies effects.

Infrastructure & Urbanization: Drives long-term demand.

Who Uses It:

Homebuyers, investors, developers, banks, and government.

In essence, an HPI provides a data-driven view of how expensive housing is getting (or not) in a specific area over time, helping everyone from individuals to policymakers make informed decisions.

Sekhar Pariti

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