The country's annual inflation rate has fallen to a four month low and it could be in single digits before the end of the year but interest rates are too still too high, said Shubhada Rao, chief economist at Yes Bank.
'The driver of inflation is now ebbing. The rapidly moderating inflation would give Reserve Bank of India more elbow room to ease monetary policy,' he said and urged the bank to follow rate cuts in the last few days in the US, China, Taiwan and Hong Kong.
The property market situation is becoming desperate according to an award winning building company.
Property prices in India's metropolitan cities have dropped by 15%. It has resulted in a standstill in some areas with no major transactions taking place,' said M C Sunny, chairman and managing director Mumbai-based National Builders.
Although the price drops are affecting areas like Mumbai and Delhi, there are, however, areas where they are remaining steady like Kerala.
Developers would like the drop prices to stimulate the property market but increasing construction costs and tighter lending criteria has made this virtually impossible, he added.
Some analysts are predicting that property prices will fall even further by the beginning of next year. 'With the debt market getting dried up, developers facing the heat of liquidity crunch and PE funds shying away from real estate investments and speculative investments at an all-time low, we can expect a 15-20% correction by the first quarter of 2009,said Anuj Puri, managing director of Jones Lang LaSalle.
The downturn is also impacting on the commercial real estate market in India. The latest report from CB Richard Ellis shows that there has been a marked decline in demand in the office market in seven major Indian cities including Delhi, Mumbai, Kolkata and Bangalore.