Is the Real Estate Stock Index a Reflection of Direct Real Estate? Empirical Evidence from India
Keywords:
Housing Prices, Real Estate Stock Index, Co-Integration, Vector-Error Correction ModelAbstract
The study examines the dynamic relationship between direct real estate prices and real estate stock index in India for the period 2010-18. The real estate prices in India have grown out of proportion in major cities making it unaffordable to a large section of population. On the other hand the real estate stock index, which captures the behavior of real estate industry has reported a CAGR of -13.42% from 2007-17. The correlation coefficient is negative and the Granger causality shows no causality, indicating the variables are independent of each other. Using the co-integration test and vector error correction model (VECM) the study explains the long run association however the model fails to show short run association among the variables under study using the Wald approach. Long term investment in direct real estate appears to be lucrative however the constant over valuation in housing prices is a matter of concern from the point of financial stability of a nation.
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