The real estate market in India has been threatening to sputter into life or die out for quite a while now. Various sources and experts agree that the market has witnessed price corrections over the past few quarters, but the key question remains, is the market headed downwards?

Going Up or Down

The National Housing Bank’s residential index tracked twenty six cities during the April-June quarter of 2013. According to the index, property prices fell in twenty two of the twenty six cities, including properties in Kolkata.
However, this has been seen as a short term scenario with prices undergoing increments and decrements over different quarters. Most properties in Delhi, Mumbai and Bangalore, have held on to their prices and have even seen consistent increments, even though those increments may have been relatively small.

Vineet Singh, the business head of, has said that the main reason for such a slowdown in market activity is the stranglehold that inflation and the consequent monetary policies have imposed on the market. The Reserve Bank of India has come up with fresh norms and regulations for borrowing and lending in the real estate market. Singh also says that property prices have reached their peaks in many cities as well.

Stricter Regulations

In September 2013, the Reserve Bank of India published a notification stating the follows:

In view of the higher risks associated with such lump-sum disbursal of sanctioned housing loans        and customer suitability issues, banks are advised that disbursal of housing loans sanctioned to     individuals should be closely linked to the stages of construction of the housing project/houses      and upfront disbursal should not be made in cases of incomplete or under-construction or green-field housing projects.

The Reserve Bank has told other banks to play it safe while financing home purchases
made under interest subvention and other such schemes. In an interest subvention scheme, the builder of the property pays interest for a specified period, commonly till the possession of the flat has been given to the buyer. The Reserve Bank asked for caution as such schemes impose liabilities on the buyer in case the builder himself defaults.

What we have to look at, is what these changes in regulations will do the price corrections which are happening in the market. Developers are under a lot of stress due to these restrictions and the demand for more housing has placed added pressure unto an already shaky market. However, real estate markets are also local markets, as affected by local issues as they are by central regulations.

Hyderabad, due to the recent bills tabled to split the state of Andhra Pradesh and the ensuing political clashes, has witnessed a significant fall in prices. South Delhi properties, earlier considered the prime of all properties in New Delhi, saw prices fall by almost twelve percent while properties in localities such as Noida and Greater Noida witnessed consistent increments due to better infrastructure and transport.

Property values in Kolkata, especially in the Rajarhat area, are slowly rising as interest in these properties has been revived following the 2008 slowdown. Mumbai has remained stable throughout with some localities such as Navi Mumbai and Thane going through rises of almost ten percent. Bangalore has also undergone a price hike.

Slowdown? What Slowdown?

Despite the slow market and the hostile global environment towards real estate, builders across India continue to be optimistic and build new projects. Marketing has become even more creative in order to rope in customers for these new projects.

These new projects are mostly based around the suburbs of large cities, where land prices are still not as high as they are in the city and municipality restrictions are still not as strict. Builders offer discounts on projects which have already been completed or are under completion.

In conclusion, while property prices are going to remain shaky in the near future, they are going to eventually start rising. There is an incredible amount of urban housing shortage in India. Home buyers are advised to continue with their purchases as the home can function as an asset as well as a home. Investors however, are cautioned and are told to stay clear of high-cost properties as these are witnessing a significant slowdown in demand as compared to low-cost properties.


Alex Dennis is a free lance writer who has worked as a real estate consultant for over a decade in India. His keen insight and experience is sought after and he often provides advice to people looking to purchase houses and properties in Kolkata, Mumbai and other Indian metropolitans. Contact him for any advice related to the real estate market in India.