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

47 Pages Posted: 26 Jan 2021

See all articles by Bhupal Singh

Bhupal Singh

International Monetary Fund (IMF)

Date Written: December 1, 2020

Abstract

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 visà-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.

JEL Classification: E51, R31, O18, G21, E31

Suggested Citation

Singh, Bhupal, House Prices and Macroprudential Policies: Evidence from City-Level Data in India (December 1, 2020). IMF Working Paper No. 2020/291, Available at SSRN: https://ssrn.com/abstract=3772497

Bhupal Singh (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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