Indian home prices post third-highest jump globally, but where's the demand?

India’s house prices showed the third-largest increase globally in the quarter ended March from a year ago, according to a report by property consultancy Knight Frank. Home prices in the countryincreased 12 percent, beaten only by Brazil’s 23.5 percent and Estonia’s 13.9 percent gains.

These increases were in sharp contrast to what happened to Knight Frank’s global house price index: it posted its weakest annual performance since the depths of the recession in 2009, rising just 0.9 percent in the year to March 2012.

Doubts over the eurozone’s future, along with the Asian governments’ staunch efforts tocool their markets and deter speculative investment, had taken their toll, the consultancy said.

The Knight Frank Global House Price Index monitors and compare the performance of 53 mainstream residential markets across the world.

The report said that during the first quarter of 2012, housing prices fell in 58 percent of the countries monitored by the index.

The news will come as bad news for potential property buyers in the country, especially in cities like Mumbai, where buying a house has become practically unaffordable.

And yet prices continue to climb. For instance, a_Firstpost_ report late last year noted that property sales in Mumbai’s overheated market dropped by a whopping 70 percent from their 2007 peak levels even as overall prices climbed by 20 percent.The report said the highest impact of the drop in sales could be seen in central Mumbai, where the quantum of unsold inventory increased to more than 45 percent of the launched units. The same could be said for other metros as well.

The situation doesn’t seem to have changed much in 2012. A_Business Standard_ report said that faltering demand has now prompted some real estate developers to go slow on new project launches.

It quoted a DLF official as saying that no numbers could be given for new launches during the first half of 2012-2013. DLF is India’s largest real estate developer by market capitalisation. Another real estate firm, Unitech, also said it had no plans to launch anything new over the next few months, the report said.

Yet there are no signs of prices coming down significantly.