How much will residential prices fall in India?

Residential rates have multiplied more than 2.5 times across the landscape of Indian Real Estate since 2001, the year from which RESIDEX provides us data. This unprecedented growth has made rates unaffordable in most cities, which are expected to see a major correction in 2009.

Real estate prices would come down to inflation-adjusted 1998 prices,” Rajiv
Singh, Vice Chairman of DLF, said.

Read the interview by Rajiv Singh, Vice Chairman, DLF.

The common belief in the realty market is that residential prices will go back to 1998-2000 inflation-adjusted levels. If we try to assess correction in different cities so that they go back to levels as suggested, we should expect a minimum of 50-60% since peak across cities. The inflation data has been taken from Global Insight. See table below.

Inferences

• The data suggests that since Bangalore and Delhi appreciated the most in the past, they are expected to correct the most as well. This is astonishing considering the increase in Commercial Office Prices in Bangalore to be moderate.
  
• Mumbai would correct by almost 60%.
  
• Kolkata would correct the least.
  
• In absolute terms, the prices would fall to 2003-2004 levels, when they would be able to revive demand.