IMF Working Papers

House Prices and Macroprudential Policies: Evidence from City-level Data in India

By Bhupal Singh

December 18, 2020

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Bhupal Singh. House Prices and Macroprudential Policies: Evidence from City-level Data in India, (USA: International Monetary Fund, 2020) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper examines the efficacy of macroprudential policies in addressing housing prices in a developing country while underscoring the importance of fundamental factors. The estimated models using city-level data for India suggest a strong influence of fundamental factors in driving housing prices. There is compelling evidence of the effectiveness of macroprudential tools viz., Loan-to-value (LTV) ratio, risk weights, and provisioning requirements, in influencing housing price movements. A granular analysis suggests an even stronger impact on housing prices of a change in the regulatory LTV ratio for large-sized vis-à-vis small-sized mortgages, which buttresses their potency in fighting house price speculations. A tightening of the risk weights on the housing assets of banks causes significant downward pressure on house prices. Similarly, regulatory changes in standard asset provisioning on housing loans also influence house prices.

Subject: Asset prices, Housing, Housing prices, Loans, Mortgages

Keywords: Asset price, Bank credit, Construction cost index, House price, Housing loan, Housing price, LTV ratio, Macroprudential policies, WP

Publication Details

  • Pages:

    46

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2020/291

  • Stock No:

    WPIEA2020291

  • ISBN:

    9781513552514

  • ISSN:

    1018-5941

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