High rise

Mumbai, Aug. 22: Investors have traditionally peered at the gyrations of the sensex to make some sense of the volatile stock markets.

Well, they can now do much the same on another equally volatile and hugely unregulated — real estate — market through a specially designed sensitive index called the Ressex.

But before we begin to explain how it works, let’s get the disclaimers out of the way. The country’s first Real Estate Sensitive Index or Ressex will be available to the user for a price that will differ from area to area. In an equity market, shares have a specified component. For example, 10 shares of Company ‘A’ will rise and fall in tandem and will not have disparities among themselves.

But, for a highly unorganised and fragmented real estate market, there is no similarity between two units even within the same locality. So how does one go about indexing the real estate market?

“We have devised a scientific tool to grade all properties within a locality using certain stipulated proprietary parameters. The two basic premises, however, will be Realisation and Rate of Attainment. Realisation is the price of the property and the Rate of Attainment will tell us about how the price is sustained over a period of time. These two will form the basis of the chart on the index,” says Pankaj Kapoor, CEO, Liases Foras, a real estate rating and research agency.

Kapoor believes there is a huge demand-supply mismatch, which is further enhanced by the lack of information and misrepresentation of facts by brokers. Having an index that intends to chart the movement of the property market on a stipulated time frame will help the end user get a better picture.

Kapoor says the Ressex factors in price, availability and supply of real estate and juxtaposes it with demand, to figure out the efficiency quotient of pricing. “The system will reduce complex decision making into an easy task — input data, process and get the analysis.”

But it comes at a price. “We cannot make it available universally because it is a premium product,” says Kapoor. So, the user has to cough up an annual registration fee of Rs 25,000. For a more localised report, the fee is anything between Rs 1,500 and Rs 2,500 depending on the area.

At present, information on only Mumbai and Thane are being charted. The information will include all developers, property and localities with their pricing. Navi Mumbai will be available shortly. In the next six months, it will cover Delhi, Bangalore, Pune, Indore and Chennai.

But who is the end user?

Kapoor claims it could be anyone related to the property market, including developers and buyers. The product is already being endorsed by some of the top developers in Mumbai. The product may be first of its kind, but the industry is not as enthused.

“Unlike the equities market, property prices do not fluctuate on a daily basis. There is also a lack of representative volume of such data. Data for the real estate market is available only when there is registration of document. Price comparison is not representative. If you do need an index, it has to be directed on the basis of rate per square feet,” says Pranay Vakil, chairman of Knight Frank India.