Residential investment
Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 12, Ch 2 "National Income Accounting"
Meaning
Residential investment is the addition to a country's stock of housing in a year. It is one of the three categories of investment in national income accounting. The other two are fixed business investment (machines, factory buildings, equipment) and a rise in inventories. Houses are counted as investment, not consumption, because they are durable assets that give services for many years.
Example
A builder constructs new apartments in Pune during 2024-25. The value of this new housing is residential investment for that year and adds to GDP. If a family buys an existing old flat instead, no new house is created. Only the broker's commission counts in GDP.
Don't confuse with
- Buying property: buying an existing house is only a change of owner and is not investment in economics. Only newly built housing counts.
- Fixed business investment: this covers capital that firms use to produce goods, not homes that people live in.
Related concepts
- Value added
- Monetary value
- Value added method
- Gross Value Added
- Net value added
- Operating surplus
- Inventory
- Change in inventories
- Planned change in inventories
- Unplanned change in inventories