The proposed changes in the Housing Index compilation methodology, including coverage of rural areas and exclusion of employer provided dwellings, will remove statistical distortions and discrepancies in the housing sector, economists said.
The Ministry of Statistics and Programme Implementation (MoSPI) has recently proposed various changes in the methodology for compilation of housing index in the revised Consumer Price Index (CPI) series to make it more robust and representative. According to the government, the base year for the new CPI series will be 2024.
The exclusion of employer-provided concessional dwellings will remove statistical distortions and make the housing index better reflect actual changes in the market, Vivek Kumar, Economist at QuantEco Research said. “The CPI housing index will be revamped next year. The index will undergo a widening and deepening exercise to include rural rentals and an increase in coverage of types of dwellings. More importantly, the survey frequency for the housing index will be aligned with the rest of the CPI basket, which will help in generating monthly data points rather than the hitherto imputed values based on a biannual price collection exercise currently,” Kumar said.
Madhavi Arora, Chief Economist at Emkay Global the proposed changes in the new series “will likely reduce housing sector discrepancies.” “The new proposed series will likely have expanded sample and sectoral coverage and improved data frequency. All of this should improve the robustness of the new series and capture the inflation undercurrents better,” Arora said.
The revised methodology proposes replacing the existing practice of gathering rent data every six months with the introduction of monthly rent collection. This shift expands sample coverage to include rent data from all selected dwellings each month, rather than limiting it to one-sixth of the sample. The change addresses concerns expressed by the International Monetary Fund experts, as maintaining representativeness under that method would require a larger sample size, which is impractical due to the scarcity of rented dwellings in many markets outside major urban centers.
Additionally, the Household Consumption Expenditure Survey (HCES) 2023–24 has incorporated house rent data for rural areas, including imputed rent for owner-occupied dwellings, alongside urban housing expenditure. As a result, the new housing index will be compiled for both rural and urban sectors, departing from the current series, which covers only the urban sector owing to the lack of imputed rural rent data in HCES 2011–12.
In terms of the sampling framework, rent data in the urban sector will be collected from up to 12 dwellings per urban market, depending on the availability of rented units, while in the rural sector, data will be gathered from up to 6 dwellings per selected village, also subject to availability.
To ensure the housing index reflects genuine market transactions and avoids distortions from concessional rates, the ministry proposed to exclude government accommodations and other employer-provided dwellings from the compilation.
Housing is one of the key components of the existing CPI series, with a 21.67% expenditure share for urban areas and 10.07% at the all-India level.
On Thursday, the MoSPI released “Discussion Paper on the Proposed Changes in the Housing Index Compilation Methodology in the New CPI Series” as part of the base revision exercise for the CPI and sought feedback and comments on proposed changes by November 20. The feedback can be sent to psd-nso2020@mospi.gov.in.