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In medium term (seven to ten years), the fundamental factors point to a continued buoyancy. Specific overheated areas could see a correction. Investors, who are holding on to houses, expecting to sell at a peak, may start selling at the signs of correction.
That is when there will be a big supply coming in the market leading to small correction.

In the long term (over ten years), things will depend primarily on two factors - India's economic growth and the interest rates. As long as India's economic growth rate is high, a nation wide crash in property prices is ruled out. Yet concerns about a possible asset-price inflation has led the Reserve Bank of India to raise the risk weights on real estate loan that pushed up interest rates on home loans. A sharp rise in rates can surely bring the roof down on real estate market but the chances of this happening in the near future are negligible. Small increases would be borne by the bank and the borrowers by readjusting payments.

A sudden increase in new housing supply can cause stagnation but that should not cause anything beyond a temporary correction. An economic slowdown leading to a cut in incomes and investment can though be a strong enough reason for the prices to crash. None of these downturns though are likely to take affect in the near future, so the real estate market looks moving northward in coming months as well.

Concluded.

* Contributed by: -
Shishir Narula,
MIB, Batch of 2005-07,
IMT, Ghaziabad.