Government Plans Major Revision in Housing Index Calculation to Better Track Inflation and Living Costs

The Union Ministry of Statistics and Programme Implementation has announced its intention to significantly overhaul the methodology employed for calculating the housing component within the Consumer Price Index (CPI), marking a substantial shift in how inflation related to shelter is measured across the country.

The ministry released a comprehensive discussion paper in October 2025, outlining proposed changes as part of its ongoing base year revision exercise. Stakeholders from various sectors have been invited to provide feedback on the recommendations, which aim to create what officials described as a more robust and resilient CPI series that accurately reflects contemporary consumption patterns.

Housing's Significant Weight in Inflation Measurement

According to the ministry, housing currently accounts for a substantial portion of the CPI calculation, representing an expenditure share of 21.7% in urban areas and 10.1% at the all-India level under the existing 2012 base year series. Officials emphasized that all components of index compilation are being re-examined to ensure the revised methodology reflects current market dynamics and household spending behaviors.

Major Methodological Changes Proposed

Monthly Data Collection Framework

One of the most significant changes being considered involves shifting from the current six-monthly rent data collection practice to a monthly framework. The ministry stated that this enhancement would improve data frequency and enable the index to be more responsive to fluctuations in the housing rental market.

Historic Inclusion of Rural Housing Data

For the first time in the history of India's CPI calculation, the housing index will extend its coverage to include both urban and rural areas. The current CPI housing index has been limited to urban India due to the absence of imputed rent data in the 2011-12 household consumption expenditure survey. This expansion is expected to provide a more comprehensive picture of housing affordability challenges across the nation.

Enhanced Sample Size for Data Collection

The ministry outlined that rent data will be collected from 12 dwellings per urban market and 6 dwellings per selected village, contingent upon the availability of rented homes in those locations. This expanded sample size is designed to capture a more representative picture of rental trends across different geographies.

Exclusion of Subsidized Accommodations

To maintain the accuracy of market-based rental rates, the proposed methodology will exclude government and concessional accommodations from the index calculation. Officials explained that these employer-provided dwellings often reflect subsidized or non-market rents that could distort the true picture of housing costs faced by most households.

Wider Implications for Policy and Economic Planning

The ministry underscored that housing represents a crucial determinant of household wellbeing in India and globally, with a substantial portion of household income typically dedicated to rent or home maintenance expenses. Consequently, a more accurate and representative housing index is considered essential for effective policymaking, inflation tracking, and social welfare planning.

The revised CPI series, once finalized and implemented, is expected to play a central role in shaping future economic assessments and policy interventions related to housing affordability, cost of living calculations, and addressing urban-rural disparities in shelter costs.

Consultation Process Underway

The statistics ministry has actively sought comments and suggestions from a wide range of stakeholders, including economic experts, economists, financial institutions, various government ministries, state governments, and other interested parties. The consultation process aims to finalize a methodology that comprehensively reflects contemporary consumption patterns and market dynamics before implementing the revised base year series.

Disclaimer: This news article is based on information released by the Ministry of Statistics and Programme Implementation. Readers are advised to refer to official government sources and consult with real estate experts for detailed understanding of how CPI revisions may impact property markets and inflation assessments. The views and information presented are for general awareness purposes only.