Happy times for home buyers as house price inflation eases to its lowest level
There is some cheer for home buyers. Even as the Reserve Bank of India (RBI) has been reducing rates, house price inflation is moderating and has increased at its slowest pace since data compilation began about six years ago. The RBI’s house price index (HPI) index moved up 9.8% year-on-year (y-o-y) to 221.7 in the third quarter of 2015-16 at the all-India level, the lowest increase ever recorded. The RBI created the index in 2010-11. The rate of increase fell below 10% for the first time in two years.
The RBI’s HPI grew 16.9% y-o-y in the third quarter of 2014-15. In 2015 as a whole, prices rose by 13.6%, slower than the 14.7% increase in 2013-14 and the 21.8% surge during 2010-12, an analysis by Nomura India showed. In all, six out of the 10 cities tracked by the HPI witnessed a moderation in the pace of house price appreciation in the third quarter, with Jaipur seeing an outright decline. Lucknow witnessed the highest increase of 16.1% while HPI declined 5.2% in Jaipur. Kolkata recorded the lowest increase in HPI among large cities during the third quarter. Chennai also saw only a modest increase in HPI, which moved up 8.2% y-o-y, the second lowest among top-5 cities.
Bengaluru registered the highest jump in HPI among large cities logging a 12.5% y-o-y growth and was followed by Mumbai (11.1%) and Delhi (9.8%). The HPI for Bengaluru however dropped 1% on a quarter-on-quarter (q-o-q) basis. HPI for Kochi increased 8% on a q-o-q basis. “Moderation in house price inflation is not surprising,” said Sonal Varma and Neha Saraf of Nomura India. “End-user demand has declined owing to significant cumulative price appreciation over the last decade that outpaced income growth, resulting in unsold inventories, especially in top-tier cities,” they said. “Low house penetration and the aggressive push by banks on retail lending could act as tailwinds, but affordability concerns suggest that risks to house prices remain to the downside,” said analysts.