Impact of design attributes and Neighbourhood externalities on an apartment's fair market value (FMV): A study of Noida

Abstract

Residential Apartments are a major part of housing infrastructure in urban areas, million-plus cities in India have witnessed a sharp rise in housing stock in the last decade. Apartment complexes are largely identified by the Design quality of the complex, the Builder’s name, amenities, and the neighbourhood. These quality standards knit a built environment that ultimately led to a better quality of life in cities. Real-Estate firms have been using these attributes as the basis of the market price and as a USP for better sales. Time and again there have been discussions on the importance of Design Quality attributes and Neighbourhood factors in deciding the price of apartment complexes, however, their contribution and empirical quantification are seldom performed. Recent studies in property research have discussed the application of hedonic regression but there are criticisms about the sensitivity of such an approach particularly the functional discontinuity, non-linearity, data quality, etc. This article proposes an approach towards finding a correlation between quality attributes and the value of an apartment using the analytic hierarchy process (AHP). 25 experts were interviewed and a pairwise comparison was drawn between different attributes resulting in a weighted index called as Apartment Quality Index.