Optimism Wanes as Property Sector Observes Crisis

Falling share prices may be a sign of things to come in the real economy. Until recently, property prices in Mumbai were on par with Manhattan’s, boosted by scores of foreign firms coming into the financial capital, looking to set up shop here.

That foreign money also helped to create hundreds of thousands of jobs for India’s young middle classes, who could now finally afford to realize their dream of owning their own home. All that demand for flats and houses caused prices to soar 40% in some of the big cities in India last year.

But now much of that money and demand has evaporated - leaving property developers out in the cold. Already prices are down some 10-15%, with forecasts of a bigger crash around the corner. “It’s hard to get anyone to buy a house these days,” he says. “No bank is willing to give loans. “My business has completely dried up. Even renting out flats to foreign companies - a huge profit earner for us - has gone down. People aren’t coming here as much as they used to.”

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