RBI has today launched the Housing Start Up Index taking baseline data from 27 cities from 2009-11. The aim is to first stabilize the methodology and then extend the coverage to 300 cities and eventually improve the frequency to release the data on a frequent (quarterly) basis. Compilation of housing starts has never been done exhaustively, given the presence of multiple authorities at different levels and lack of any methodical approach to collating data. This index, if stabilized, may eventually lead to better policy prescription for the Real Estate sector (10% of GDP and relationship with 250 ancillary industries) which has frequently complained about excessively tight policies and regulations governing it. Also this will give markets likely a better nuanced understanding of the wide variation seen in trends across different cities.
HSUI could improve policy prescription-RE sector has been very tightly controlled in terms of overall policy and suffers from various procedural delays in granting approvals. An HSUI, by reflecting the data back to relevant government authorities and also making it public, could help reduce approval lags and also reduce lead times on timeliness and extent of measures regarding policy. At the margin we note that regulators have taken a slightly lenient view given the general slowdown, by reducing risk weights and provisioning norms for residential construction lending
Data read through confirms long held belief that Tier2 is doing better than metros- the data albeit released with a huge lag confirms the belief that new construction growth has largely been led by Tier 2 cities as opposed to Metros, which in general have seen limited recovery post 2009. Post 2014, however, we think the equation will likely change in the favor of metros as city expansion, localized infrastructure creation will likely create opportunities for suburban growth. Bangalore as of now continues to be the most favored market
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