Using Hedonic Regression Coefficient Estimates to Predict House Prices in India

Posted: 17 Oct 2017

See all articles by Arnab Dutta

Arnab Dutta

Price School of Public Policy

Madalasa Venkataraman

Indian Institute of Management (IIMB), Bangalore - Century Real Estate Research Initiative

Venkatesh Panchapagesan

The Goldman Sachs Group, Inc.

Date Written: July 4, 2017

Abstract

Real estate markets in emerging economies are beset with price opacity, low transaction volumes and perverse incentives on tax evasion, leading to acute shortage of reliable price information. In this paper, we overcome the paucity of reliable price information in emerging markets through a novel approach. The aim of this paper is to use the limited available housing data from one city, to predict house prices in another city. We achieve this, by using a methodology to predict residential real estate prices from socio-economic, climatic and demographic features of a city. We use more than a million residential housing units from listed properties, in 6 metropolitan cities in India, over a period of 6 years, to construct 36 hedonic price models, and obtain a panel of coefficient estimates. Then, we regress these hedonic coefficient estimates of housing attributes, on a collection of socioeconomic, climatic and demographic features of a city. The resulting two-stage model is able to predict house prices, both within and outside our sample of analysis. For out of sample cities, the explained variation in house prices is 84%.

Keywords: Hedonic regression, house price prediction

JEL Classification: R390

Suggested Citation

Dutta, Arnab and Venkataraman, Madalasa and Panchapagesan, Venkatesh (Venky), Using Hedonic Regression Coefficient Estimates to Predict House Prices in India (July 4, 2017). Available at SSRN: https://ssrn.com/abstract=3053925

Arnab Dutta (Contact Author)

Price School of Public Policy ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States
3237096609 (Phone)

Madalasa Venkataraman

Indian Institute of Management (IIMB), Bangalore - Century Real Estate Research Initiative ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Venkatesh (Venky) Panchapagesan

The Goldman Sachs Group, Inc. ( email )

85 Broad Street
New York, NY 10004
United States

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