Hedonic Pricing of Indian Urban & Slum Rental Markets

Abstract

In India the existing legal structure for dealing with slums is a process of slum regularization called notification. This paper uses a hedonic model for rental prices in urban India to accomplish two goals. First a Tornqvist price index for non-slum, notified, and non-notified slums is constructed and then using market data from three large states, the marginal willingness to pay function for legal notification is estimated. The Tornqvist quality adjusted index finds that while prices have been increasing over the past two decades in real Rs. terms, when adjusted for quality, they have in fact leveled or begun to decrease in the 2000s. However, though it seems notified slums have benefitted the most from improved housing quality; the estimated marginal willingness to pay for notification that is implicit in rental prices is modest.