Housing index: Rural rent in, staff accommodation out

The housing index in the new inflation series will include rural areas alongside urban centres, but exclude government and employer-provided accommodations as they don't reflect rent market transactions, according to a discussion paper released by the statistics ministry on Thursday.The current housing index covers only the urban sector due to the absence of imputed rent data for rural areas in the Household Consumption Expenditure Survey (HCES) 2011-12, the ministry said.The Ministry of Statistics and Programme Implementation (MoSPI) is revising the Consumer Price Index (CPI) base year to 2024 from 2012, with item weights based on the 2023-24 HCES.The ministry proposes to collect rent data monthly instead of the current practice of every six months. Based on availability, rent will be gathered from 12 dwellings per market in urban areas and six in rural areas. The dwelling type weight will be based on Census 2011.The proposed changes in the methodology aim to make the housing index more robust and representative, the ministry said.In the current CPI series, housing accounts for an expenditure share of 10.07% at the national level and 21.67% in urban areas.According to data released last month, housing inflation accelerated to 3.98% in September from 3.09% in August. Overall, India's retail inflation eased to 1.5% from 2.1% over the same period.The paper highlighted several limitations identified by experts in the existing methodology, such as the use of three different calculation methods that caused a sharp jump in inflation after May 2013, and the use of six-month old data that it said led to "unexplainable" movement in monthly housing inflation rates after December 2013.According to the discussion paper, experts at the International Monetary Fund noted that the six-month panel survey approach could create a downward bias and recommended moving to one-month changes for accuracy.\ "The issue of some distortions in some months, introduced due to concessional or employer-provided dwellings, was also highlighted by the users including the Reserve Bank of India," the paper said.The inclusion of employer-provided housing negatively impacted rent estimates, as salary-related housing rent allowance (HRA) changes do not reflect actual market rents, it added.