Market reports point to reduction in property prices across the key metro cities in India. Cities such as Delhi, Mumbai and Bangalore that have witnessed a huge run up in prices over the last few years are seeing a correction. Property prices in other cities such as Kolkata and Chennai that still have affordable housing available are not seeing a decline, though growth rates may slow down.

The drop in prices is driven by the sharp increase in housing loan interest rates in the last few months as well as other steps taken to control a potential housing asset bubble financed by massive doses of loans. For example, the Reserve Bank of India on Apr 18 took a sector-specific approach in its annual monetary policy to curb the phenomenal growth in bank credit. The RBI advised banks to raise the provisioning requirement for housing loans beyond Rs 20 lakh from 0.4 per cent to 1 per cent.

In Mumbai, prices of apartments in areas such as Andheri and Goregaon are about 20% below their peak prices according to real estate brokers. Prices have also fallen in Navi Mumbai and other suburbs. While the monsoon season is typically a low season, this time there is a 25% dip in transactions, also leading to pressure on prices. While the mid-market segment has seen a decline in property prices, the prime residential market has till recently done very well.

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Posted in: on Wednesday, December 10, 2008 at at 4:37 PM