The housing activity in the country, high already, is expected to further accelerate in the next few years, mainly because the government has already announced that it is committed to providing a house for all by 2022. The increased activity will impact the housing markets as a change in the house price affects the households’ perceived lifetime wealth and hence influences the spending and borrowing decisions of households. Further, house price gains increase housing collateral and hence housing credits. The potential two-way link between bank lending and house prices give rise to mutually reinforcing cycles in credit and real estate markets. The increasing dominance of the sector necessitated the setting up of a mechanism that could track the movement of prices in the residential housing segment. Therefore, it becomes necessary to prepare an accurate measure of aggregate house price, despite the limited availability of data, in order to understand the behavior of housing markets and their influence on the economy. To understand about house prices, it is important to understand about housing indices. In India, NHB and RBI construct and release an index each, RESIDEX and HPI, respectively. In case of both the indices, there are a number of problems. In India, there is a lack of scholarly work on real estate markets. However, the housing activity in the country, high already, is expected to further accelerate in the next few years, mainly because the government has already announced that it is committed to provide a house for all by 2022.

To encourage housing activities, the government is extending incentives such as easier flow of FDI, the inclusion of slum development in the list of Corporate Social Responsibility (CSR) activities and additional tax incentives on home loans to encourage people, especially the young, to own houses. The government has also proposed to set up a Mission on Low-Cost Affordable Housing to be anchored in the National Housing Bank (NHB) with an allocation of Rs. 4,000 crores for NHB with a view to increasing the flow of cheaper credit for affordable housing to the weaker segment. To further encourage this, projects which commit at least 30 percent of the total project cost for low-cost affordable housing will be exempted from minimum built-up area and capitalization requirements, with the condition of three-year lock-in. The government has also proposed to increase the allocations for the year 2014-15 to Rs. 8,000 crore for NHB with a view to expand and continuing to support rural housing in the country.