JoseGaary

Properties in Tripunithura costs have risen over the past two years and even the richest NRI struggling to invest in the properties. Realtors say it may be less than a year before the air gets sucked out of some of India's localized property bubbles. But such predictions have been common for months and the market shows no sign of cooling. There is a lack of reliable data, but over the last two months, there've been lot more speculators coming into the market than first-time buyers and that's not encouraging. Prices are sky-high for decent buildings and available properties, even for those with few millions to spend, can be counted on two hands. The sharp rise in prices has been driven by the easy availability of cheap capital. With the economy driven by consumption, a drop in housing would hurt. The potential impact growth rates may be magnified if it is accompanied by a slump in the stock market. There is a wealth effect from rising equity prices, but not as a dominant determinant of Indian growth rates. The corrective process in the property market is for prices to plateau rather than crash.

But there are India centric factors at work too. Banks have been cavalier, with loans for housing rising by more than 50% year on year and credit to commercial real estate more than doubling. RBI in a belated move aimed at mitigating the risk of a housing-related banking crisis, increased the amount its own capital banks must set aside against property loans. It lifted the CRR by 50 points to 5.5 per cent. With consumer price inflation hovering about 7%, economists expect further interest rate rises early this year. This would affect the finances of thousands of middle-class Indians who have stretched themselves to buy homes. Quality lessees will look at a certain minimum area. Experts believe that such spaces will on average cost more than Rs 1 crore, though some good retail spaces could go for less. Small, affordable properties see greater liquidity and genuine user demand.