Analyst poll – Real estate sector is expected to bounce back modestly through the government measures.

According to an analyst poll by Reuters, The housing market in India, burdened by unfinished projects, as developers struggle to access money, is expected to recover modestly in the coming year on government efforts to unblock the market.

The government has approved the 100 billion rupees ($1.4 billion) fund earlier this month to help clear up unfinished building projects, with an additional 150 billion rupees of state-run financial institutions. Although the government says that the fund will help to recover over 1,600 failing housing projects, this may not be sufficient.

“It’s a big question of whether the fund announced will be enough to break the entire inventory. Financing options, including banks and non-banking financial companies, have evaporated and investors prefer commercial real estate,” said Anuj Puri, chairman of ANAROCK Property Consultants, based in Mumbai.

“The approved funds can, however, rescue lakhs (thousands) of homebuyers who have invested in projects that are stuck.” But most analysts 11 out of 15 said the fund is enough to “reinforce” demand. The poll conducted on November month, 6–19 Reuters prophesied national average prices would rise by 3.0% next year and 4.3% by 2021; a rise from 2.0% and 3.5% predicted three months earlier.

While these calls had been the most optimistic since polls started during these periods, double-digit annual growth in house prices would diminish the industry before the government bans on high-value cash notes in late 2016.

The Indian real estate industry, which in the last three years has suffered a severe liquidity crunch following a series of non-banking high profile financial companies’ debt defaults, has not been fully recovered from this shock prohibition. Cash transactions are still very high in the Indian real estate industry.

Following the easy monetary and fiscal policy, in the April-June quarter, the economy slowed to a six-year low of 5% in growth compared to the same period one year before. Recent business surveys suggest there is no recovery lurking around the corner.

This year, the Reserve Bank of India has cut interest rates to 5.15% by a total 135 basis points, making it the world’s aggressive easing major central bank. It is expected, that in December month the policymaker will again reduce the repo rate.

Pankaj Kapoor, the managing director at Liases Foras in Mumbai said, “Thanks to extensive real estate financialisation the sector is no longer productive because capital pushes its gain rather than creating more affordable housing and generating demand.” All this has now become unaffordable, and even if construction companies want to cut prices, they have no margin for doing so.

If we want to scale in terms of affordability from 1 to 10, where 1 is extremely affordable while 10 is extremely expensive, Bengaluru and Chennai are rated 6, the National Capital Region (NCR) 7, Delhi was rated 8 and Mumbai was at a maximum 10.