Browse > Article
http://dx.doi.org/10.13106/jafeb.2020.vol7.no8.033

An Empirical Testing of a House Pricing Model in the Indian Market  

HODA, Najmul (Department of Business Administration, College of Business, Umm Al-Qura University)
JAFRI, Syed Ashraf (Statisticka Consulting Group)
AHMAD, Naim (Department of Information Systems, College of Computer Science, King Khalid University)
HUSSAIN, Syed Mannawar (Mosanada Facilities Management Services)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.8, 2020 , pp. 33-40 More about this Journal
Abstract
The main aim of the study is to test a house pricing model by combining hedonic and asset-based pricing models. An understanding of the relationship between house pricing and its return (the rental income) helps to establish houses as a significant asset class. The model tested the relationship between house pricing (dependent variable) and the house attributes (independent variables) derived from Freeman's framework of housing attributes. This study uses a large data-set of 1,899 sample of new, high-end houses purchased between 2016 and 2019 collected from the national capital region of India (Delhi-NCR). The algorithm was built in R-Script, and stepwise multiple linear regression was used to analyze the model. The analysis of the model proves that the three significant variables, namely, carpet area, pay-off, and annual maintenance charges explain the price function. Further, the model is statistically fit. The major contribution of the study is to understand the key factors and their influence on the house pricing. The model will be helpful in risk assessment in the housing investment and enhance the chances of investment. Policy-makers can use information about the underlying valuation drivers of the house prices to stabilize the market and also in framing the tax policies.
Keywords
House Pricing Model; Asset Pricing Model; National Capital Region; R-script; Step-wise Multiple Linear Aggression;
Citations & Related Records
Times Cited By KSCI : 8  (Citation Analysis)
연도 인용수 순위
1 Freeman, A. M. (1979). Hedonic Prices, Property Values and Measuring Environmental Benefits: A Survey of the Issues. The Scandinavian Journal of Economics, 81(2), 154. https://doi.org/10.2307/3439957   DOI
2 Gelain, P., & Lansing, K. J. (2014). House prices , expectations , and time-varying fundamentals. Journal of Empirical Finance, 29(1), 3-25.   DOI
3 Hansen, L. P., & Cochrane, J. H. (1992). Asset Explorations Pricing Macroeconomics for. In NBER Macroeconomics Annual 1992.
4 Harrison, D., & Rubinfeld, D. L. (1978). Hedonic housing prices and the demand for clean air. Journal of Environmental Economics and Management, 5(1), 81-102. https://doi.org/10.1016/0095-0696(78)90006-2   DOI
5 Hussain, T., Abbas, J., Wei, Z., & Nurunnabi, M. (2019). The effect of sustainable urban planning and slum disamenity on the value of neighboring residential property: Application of the hedonic pricing model in rent price appraisal. Sustainability, 11(4), 1144. https://doi.org/10.3390/su11041144   DOI
6 IBEF. (2020). Indian real estate industry report. Retrieved June 6, 2020, from IBEF website: https://www.ibef.org/industry/real-estate-india.aspx
7 Kim, K., & Park, J. (2005). Segmentation of the housing market and its determinants: Seoul and its neighbouring new towns in Korea. Australian Geographer, 36(2), 221-232. https://doi.org/10.1080/00049180500150019   DOI
8 Kok, S. H., Ismail, N. W., & Lee, C. (2018). The sources of house price changes in Malaysia. International Journal of Housing Markets and Analysis, 11(2), 335-355. https://doi.org/10.1108/IJHMA-04-2017-0039   DOI
9 Kusan, H., Aytekin, O., & Ozdemir, I. (2010). The use of fuzzy logic in predicting house selling price. Expert Systems with Applications, 37(3), 1808-1813. https://doi.org/10.1016/j.eswa.2009.07.031   DOI
10 Li, W., Joh, K., Lee, C., Kim, J. H., Park, H., & Woo, A. (2015). Assessing Benefits of Neighborhood Walkability to Single-Family Property Values: A Spatial Hedonic Study in Austin, Texas. Journal of Planning Education and Research, 35(4), 471-488. https://doi.org/10.1177/0739456X15591055   DOI
11 Lisi, G. (2019). Property valuation: the hedonic pricing model - location and housing submarkets. Journal of Property Investment and Finance, 37, 589-596. https://doi.org/10.1108/JPIF-07-2019-0093   DOI
12 Liu, X. (2013). Spatial and Temporal Dependence in House Price Prediction. Journal of Real Estate Finance and Economics, 47(2), 341-369. https://doi.org/10.1007/s11146-011-9359-3   DOI
13 Nguyen, H. C., & Do, D. T. (2020). Factors Influencing the Perception of the Selling Price of Luxury Apartments. 7(5), 185-194. https://doi.org/10.13106/jafeb.2020.vol7.no5.185   DOI
14 Nguyen, J. (2016). 4 Key Factors That Drive The Real Estate Market. Investopedia.
15 Nguyen, M. L. T., Bui, T. N., & Nguyen, T. Q. (2019). Relationships between real estate markets and economic growth in Vietnam. Journal of Asian Finance, Economics and Business, 6(1), 121-128. https://doi.org/10.13106/jafeb.2019.vol6.no1.121   DOI
16 Pagourtzi, E., Assimakopoulos, V., Hatzichristos, T., & French, N. (2003). Real estate appraisal: A review of valuation methods. Journal of Property Investment & Finance, 21, 383-401. https://doi.org/10.1108/14635780310483656   DOI
17 Oladunni, T., & Sharma, S. (2017). Hedonic Housing Theory - A Machine Learning Investigation. 2016 15th IEEE International Conference on Machine Learning and Applications (ICMLA), 522-527. https://doi.org/10.1109/icmla.2016.0092
18 Oladunni, T., Sharma, S., & Tiwang, R. (2017). A spatio-temporal hedonic house regression model. Proceedings - 16th IEEE International Conference on Machine Learning and Applications, ICMLA 2017, 2017-Decem, 607-612. https://doi.org/10.1109/ICMLA.2017.00-94
19 Pace, R. K., & Zhu, S. (2017). Implicit Hedonic Pricing Using Mortgage Payment Information. Journal of Real Estate Finance and Economics, 54(3), 387-402. https://doi.org/10.1007/s11146-016-9578-8   DOI
20 Palmquist, R. B. (1980). Alternative Techniques for Developing Real Estate Price Indexes. The Review of Economics and Statistics, 62(3), 442-448.   DOI
21 Phuoc, L. T. (2018). Jensen's alpha estimation models in capital asset pricing model. Journal of Asian Finance, Economics and Business, 5(3), 19-29. https://doi.org/10.13106/jafeb.2018.vol5.no3.19   DOI
22 Prost, L., Makowski, D., & Jeuffroy, M. H. (2008). Comparison of stepwise selection and Bayesian model averaging for yield gap analysis. Ecological Modelling, 219(1-2), 66-76. https://doi.org/10.1016/j.ecolmodel.2008.07.026   DOI
23 Randeniya, T., Ranasinghe, G., & Amarawickrama, S. (2017). A model to Estimate the Implicit Values of Housing Attributes by Applying the Hedonic Pricing Method. International Journal of Built Environment and Sustainability, 4(2), 113-120. https://doi.org/10.11113/ijbes.v4.n2.182
24 Tu, Q., de Haan, J., & Boelhouwer, P. (2017). The mismatch between conventional house price modeling and regulated markets: insights from The Netherlands. Journal of Housing and the Built Environment, 32(3), 599-619. https://doi.org/10.1007/s10901-016-9529-y   DOI
25 Stadelmann, D. (2010). Which factors capitalize into house prices? A Bayesian averaging approach. Journal of Housing Economics, 19(3), 180-204. https://doi.org/10.1016/j.jhe.2010.07.002   DOI
26 Sunak, Y., & Madlener, R. (2017). The impact of wind farms on property values: A locally weighted hedonic pricing model. Papers in Regional Science, 96(2), 423-444. https://doi.org/10.1111/pirs.12197   DOI
27 Sunding, D. L., & Swoboda, A. M. (2010). Hedonic analysis with locally weighted regression: An application to the shadow cost of housing regulation in Southern California. Regional Science and Urban Economics, 40(6), 550-573. https://doi.org/10.1016/j.regsciurbeco.2010.07.002   DOI
28 Wang, P., & Kim, J.-P. (2014). The Value of Reverse Mortgage Loans: Case Study of the Chinese Market. Journal of Asian Finance, Economics and Business, 1(4), 5-13. https://doi.org/10.13106/jafeb.2014.vol1.no4.5.   DOI
29 Yoo, J., & Ready, R. (2016). The impact of agricultural conservation easement on nearby house prices: Incorporating spatial autocorrelation and spatial heterogeneity. Journal of Forest Economics, 25(1), 78-93. https://doi.org/10.1016/j.jfe.2016.09.001   DOI
30 Ready, R. C., & Abdalla, C. W. (2005). The amenity and disamenity impacts of agriculture: Estimates from a hedonic pricing model. American Journal of Agricultural Economics, 87(2), 314-326. https://doi.org/10.1111/j.1467-8276.2005.00724.x   DOI
31 Research and Markets. (2015). Indian Affordable Housing Market Analysis - The Changing Paradigm. Retrieved June 6, 2020, from https://www.researchandmarkets.com/research/8dw756/ indian_affordable
32 SELİM, S. (2008). Determinants of House Prices in Turkey : A Hedonic Regression Model. Dogus Universitesi Dergisi, 1(9), 65-76. https://doi.org/10.31671/dogus.2019.223   DOI
33 Sirmans, G. S., Macpherson, D. A., & Zietz, E. N. (2005). The composition of hedonic pricing models. Journal of Real Estate Literature, 13, 3-43.
34 Abidoye, R. B., & Chan, A. P. C. (2017). Critical review of hedonic pricing model application in property price appraisal: A case of Nigeria. International Journal of Sustainable Built Environment, 6, 250-259. https://doi.org/10.1016/j.ijsbe.2017.02.007   DOI
35 Abidoye, R. B., & Chan, A. P. C. (2018). Improving property valuation accuracy: A comparison of hedonic pricing model and artificial neural network. Pacific Rim Property Research Journal, 24(1), 71-83. https://doi.org/10.1080/14445921.2018.1436306   DOI
36 Baek, U., & Lee, S. K. (2018). Searching for comparative value in small and medium-sized alternative accommodation: A synthesis approach. Journal of Asian Finance, Economics and Business, 5(2), 139-149. https://doi.org/10.13106/jafeb.2018.vol5.no2.139   DOI
37 Calomiris, C. W., Longhofer, S. D., & Miles, W. (2009). The (Mythical?) Housing Wealth Effect. NBER Working paper 1575. https://doi.org/10.2139/ssrn.1424106
38 Campbell, J. Y., & Cochrane, J. H. (2000). Explaining the poor performance of consumption-based asset pricing models. Journal of Finance, 55(6), 2863-2878. https://doi.org/10.1111/0022-1082.00310   DOI
39 Zainora Asmawi, M., Mohit, M. A., Noor, N. M., Abdullah, A., & Paiman, T. (2018). Factor analysis on hedonic pricing model on open space affecting the housing price in melaka and seremban. Planning Malaysia, 16(2), 119-130. https://doi.org/10.21837/pmjournal.v16.i6.467
40 Yuan, F., Wei, Y. D., & Wu, J. (2020). Amenity effects of urban facilities on housing prices in China: Accessibility, scarcity, and urban spaces. Cities, 96(April 2018), 102433. https://doi.org/10.1016/j.cities.2019.102433   DOI
41 Fan, G. Z., Ong, S. E., & Koh, H. C. (2006). Determinants of house price: A decision tree approach. Urban Studies, 43(12), 2301-2316. https://doi.org/10.1080/00420980600990928   DOI
42 Debrezion, G., Pels, E., & Rietveld, P. (2007). The impact of railway stations on residential and commercial property value: A meta-analysis. Journal of Real Estate Finance and Economics, 35(2), 161-180. https://doi.org/10.1007/s11146-007-9032-z   DOI
43 Diao, M., & Ferreira, J. (2010). Residential property values and the built environment: Empirical study in the Boston, Massachusetts, Metropolitan Area. Transportation Research Record, (2174), 138-147. https://doi.org/10.3141/2174-18
44 Dubin, R. A. (1998). Predicting House Prices Using Multiple Listings Data. Journal of Real Estate Finance and Economics, 17(1), 35-59. https://doi.org/10.1023/A:1007751112669   DOI