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Tag Report

Housing start is considered to be a lead indicator in many developed and developing economies because of the strong forward and backward linkages it has with various sectors. The number of housing starts during a given period reflects the institutional response in a country to the current demand and supply situation in the market, as reflected though operationalisation of the existing building permits into actual starts. This has an impact not only on the construction activities but also on several consumer durables and investment goods sector of the economy.

The decision to set up a Technical Advisory Group (TAG) by the Reserve Bank of India to consider bringing out Housing Start up Index (HSUI) on a regular basis is extremely timely. This is particularly so because the current meltdown of the economy at global level as also in many less developed countries have been linked partially to the ‘developments’ in the housing sector. Indeed, these have powerful multiplier effects on the economy, operating through the intersectoral linkages in the production system. It makes a significant impact on financial sectors as well, as has been realized with some amount of concern, in recent months.

The members of the TAG consider construction of HSUI and its regular release to be an extremely important and challenging responsibility which has been long overdue. They plead for taking urgent measures to put into operation an institutional structure entrusted with the responsibility of bringing out HSUI, keeping in view the global practices as also the ground reality of India into consideration. This indeed, can become a powerful tool for monitoring the movements in several segments of the economy.

The start up coefficients, computed from the data in recent past, reflect institutional and social response to housing permits, in terms of their conversion into actual housing starts. The time required for administrative and procedural clearances after the issuance of permits, to complete the formalities of obtaining loans, organizing materials, construction process etc. can be considered to be somewhat rigid or fixed in the short run. As housing is a long term decision, predictions based on these coefficients, that reflect procedural and social rigidities governing the house construction process, are likely to be fairly reliable ...read more