RBI Survey suggests Decline in Housing Price Inflation

Economic Times reported a survey conducted by the Reserve Bank of India regarding the Housing Price Inflation in the country. The report brought forward some surprising results. The Housing Price Inflation in the country was reported at four year low. This time it was below 4 percent.
According to previous reports, housing prices experienced an increase of 61 per centover a period of four and a half years. Jaipur recorded the highest increase of whopping 78 percent and Chandigarh reported the lowest inflation level of 40 per cent.

The survey was conducted the RBI across 13 cities. It was based on the home loan disbursed by 35 lending organisations including housing finance companies and scheduled banks across these cities. The housing price inflation is calculated based on the rise in Residential Property Price Index (RPPI). The RPPI rose to 172 in 2014-15 from 170 in 2010-11. The same index experienced the highest increase in 2013 and now it has come to a decline.

The report suggested that during the previous years the housing price inflation was going was higher than the rise in residential rent. But the trend has changed now. Now both of these go hand-in-hand. The Loan to Value (LTV) ratio has also decreased over the quarters which is evident from the fact that the banks have become cautious in sanctioning loans to homebuyers.

Banks use the LTV ratio to measure the loans exposure to the changes in housing prices. However, no variation was noted in the Loan to Income ratio and the Income to EMI ratio.