Releasing the index, which will help tracking the movement of residential prices in the country, the Economic Survey 2007-08 said this is important to facilitate supply of affordable housing to people. Because of high economic growth in the last five years, the demand for houses has gone up substantially, which has pushed up prices. This underlined the need for a transparent system to track prices.

The survey said the real estate assets are a significant component of the wealth of the companies and people, so availability of funds is important for the growth of the sector. For the financial intermediaries also, home loans have been a significant component of their credit portfolio.

However, the present index is till 2005 only, and NHB is working to update the data to make it more recent. Says a source in the bank, the next upgradation would be done by June this year, where the indexation of price movement till 2006 will be done.

However, because of the diversified nature of the real estate market, the index can not reveal the price trend of the entire market. Take for example Delhi. According to the data, prices doubled between 2001 and 2005. But in some areas like Patparganj and Mayur Vihar, prices of a three-bed room apartment went up from Rs 14 lakh to Rs 70 lakh. At the same time, in a place like Greater Kailash, price of land almost doubled from Rs 55,000 per sq metre to Rs 1,10,000 per sq metre.

Similarly, in Noida and Gurgaon also, prices rose much more sharply than what is revealed by the NHB index. However, developers say that the index gives a clear picture of the emerging trend in the real estate market. Particularly, the overseas investors would find it handy to take an investment decision in the sector.

In the index, cities like Mumbai and Kolkata are divided in three distinct parts. This makes the index more meaningful as investors could relate to the price rise in various parts of the city. Developers feel a similar method should be used for cities like Delhi and Bangalore also.