ndia’s property market is set for tough times. Residential property prices are falling in more cities than they are rising in real terms (given India’s high inflation, it is important to distinguish nominal price rises from real price rises).

The new governor of the Reserve Bank of India, Raghuram Rajan, has added to the pressure by hawkishly raising key interest rates, in the face of an already weak economy.

Nominal house prices rose in 10 cities (out of the 15 cities covered by National Housing Bank (NHB) Residex figures) during the year to Q2 2013, while 5 cities had price nominal house price declines. But when adjusted for inflation, house prices actually fell in 11 cities, whereas only 4 cities experienced price increases.

House prices in New Delhi rose by around 15.7%, the third highest nominal y-o-y growth of all 15 cities. When adjusted for inflation, house prices in New Delhi actually rose by only 4.6%.

Mumbai posted a 12.2% y-o-y nominal price growth, but house prices only increased by 1.4% in real terms.

The highest annual house price increase was in Jaipur at around 41% (27.4% in real terms) during the year to Q2 2013. It was followed by Kochi, which had a 17.8% price increase (6.5% in real terms).

Faridabad registered the largest price drop in Q2 2012, contracting by 6.9%, or about -15.9% when adjusted for inflation. It was followed by Kolkata with a 3.6% drop (-12.9% in real terms) and Surat with a 2.1% drop (-11.5% in real terms). Chennai and Hyderabad also had nominal price declines of 1.9% and 1.2%, respectively.

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